Volatility and liquidity in cryptocurrencies

Hello, friends! Today we will talk about volatility and liquidity in cryptocurrencies. I will tell you what these concepts mean by themselves, and why they affect the profit or loss of traders. You will also learn the reasons why some tokens have more volatility and liquidity, and which less. Go!

What is cryptocurrency volatility?

Volatility and liquidity in cryptoVolatility represents the range and percentage fluctuation in the value of cryptocurrencies. For example, Bitcoin is a medium volatile coin because it doesn’t always go up or down quickly. Usually, the price of bitcoin fluctuates in the range of 3-5 percent per day, and sometimes even 1-2 percent. This is certainly not taking into account the news and the current economic situation.

Fluctuations occur both for growth and fall. Altcoins such as DOT, ADA, XRP, KAVA, BNB, and others are capable of making 5 to 10 percent or more per day. And new tokens, both promising protocols, and shitcoins, are capable of making from 50 to 100% per day! That is, these are highly volatile coins.

Conversely, dead cryptocurrencies that are not very popular or not in demand at the moment can almost standstill and do not change in value. Or change by 0.5-1% per day. These are low volatile assets. It should be borne in mind that the volatility of token changes, both up and down.

To make money, traders and investors need to choose medium and high volatile digital money. You can trade successfully only BTC, ETH, and BNB, they are medium volatile and more predictable, but they do not always bring high income. If you want more income, you should choose more volatile tokens, but the risks also increase. Sites such as “Coinmarketcap, Coincheckup, and Coingecko” are used to assess the volatility of coins.

What is cryptocurrency liquidity?

But in addition to volatility, liquidity in cryptocurrencies is also of great importance. Liquidity is the ease and availability of a coin for quick exchange for other coins or cash. In other words, liquidity is understood as the ability to quickly buy or sell a token. If a token is hard to sell, then it is low liquid, if easy, then it is highly liquid.

Tokens such as BTC, BNB, ETH, ADA, DOT, KAVA, SXP, XRP, and many others are popular, they are known and used by most traders and investors, so they are highly liquid. Therefore, the more popular and famous a coin is, the more liquid it is. And the more exchanges a cryptocurrency is traded on, the more liquid it is.

In this regard, when a cryptocurrency starts trading on a new exchange, its availability and liquidity increase. Low liquidity means that with high volatility there will be jumps in the value of the token. High volatility means that the volatility will be less and there will be no sharp jumps in the price of the coin.

Selling and buying digital money is easier in a liquid market when orders are filled quickly. This allows you to take profit or loss in time. When, as in an illiquid market or exchange, orders take a long time to fill or not at all, this forces the trader to pay more commission or take a larger loss on the trade.

Slippage in transactions in cryptocurrencies

If high volatility is not always useful, because in addition to profit it also brings losses, then high liquidity is always good. In addition, the high liquidity of a particular coin is better suited to technical and graphical analyzes. What are the factors affecting liquidity? The first is Trading Volume.

The more participants trade a coin and the more exchanges this coin is represented, therefore, the greater its volume and liquidity. The second is the ability to use a token. If a token is used as a means of payment in stores, restaurants, or on websites, the more liquid and in demand it is. The third is the development team and legislation.

In some countries, cryptocurrencies are allowed, while in others they are prohibited. Some digital money is backed by well-known companies and developers, while others are not. I would like to say a few more words about slippage in deals. This is a situation when, when exiting or entering a trade, the trader receives a different price than he expected earlier.

Slippage often occurs in low liquidity and high volatility market, when a trader buys or sells a token at a higher price than he or she expected. Therefore, it is better to trade highly liquid and medium volatile cryptocurrencies in order to maintain the optimal risk + reward ratio.


The video on volatility and liquidity in cryptocurrencies has been completed. You have learned what these terms mean, and what coins and when is the best to trade. If you want to learn how to trade highly liquid and medium volatile coins, join the private group botcryptotrade.com

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