In a conversation today, people were talking about the crypto market volatility and how crazy it was, even though it is correlated to the traditional markets. They think that if it is tracking, it should be 1 to 1 percentagewise, but they don't factor in the movement up and down. For sure, the crypto markets are far more volatile, but they also shift much faster and further to both the upside and the downside, so though they are correlated, the movement is "comparable" with the major difference in potential.
For the average human, these swings are scary to consider getting involved with, because they see the 30, 40, 60 percent drops and imagine losing that amount of money "overnight". They prefer the relative safety of the traditional markets where over the space of a month, 10 percent loss is a lot, as is 20 percent gain in the year. But, for the casual observer, they don't track the value of crypto in general, and therefore don't really know what a 50% drop is in relation to. For example,
For those remember the March 2020 dip which hit all markets, the total market cap of crypto dropped to 121 billion. but, 9 months later at the start of 2021, it was sitting 650% up at 780 billion. 5 months later it went another 350% to 2.5 trillion and then two months after that in July 2021 (6 months ago), had lost 50% of its value to the bottom out at 1.2 trillion, still 80% up for the year. And of course, less than six months later again, toward the end of 2021 it hit 2,9 trillion dollars in market cap, 370% up on the year's starting value.
Now it is "crashing" and currently sits at 1.67 trillion dollars, 200% up over the last 12 months.
Volatile?
Yes.
Opportunity?
Yes.
High volatility allows for large opportunity and unlike the traditional markets, these swings aren't going to come over the space of a decade, they could do it several times in the space of a calendar year.
Using very basic calculations (in my head) buying 780 of "general crypto" at the start of 2021 and selling half (390) when the cap was 2 (top was 2.5T) would collect 1000 more. Using that 1000 to buy back at 1.6T would get another 200 for a total of 390+1000+200=1590, which is over double the starting amount. Selling half (795) on the next run up at 2.5 (top 2.9T) would sell for 2550 compared to the starting value and buying back with that today would get 4473, for a total of 4473+795= 5268.
What this means is that with the starting 780 in "general crypto" and selling 20% from the tops and buying 20% from the bottoms a couple times each, a year later a person could have made 675% on their starting capital. This means that the recent drop has cost them about 500% in value, but they are still up 6 times. Now, at this point, even if they bought at the 780 point and held til today, they are still up over 2x. so based on the general market trend, they would need it to lose around another 85% of its current value to be in the red. If looking just at Bitcoin as a reference, that would price it in at $5500 dollars each.
Note: That visualization works in my heard... weirdly.
And, what people don't factor in is that many of the same people were also buying the March 2020 dip also, which means that along that path, they might be up 500% on top of that again, or more.
But, it is also because of these massive gains that there are going to be massive drops too, as when the gains are this large, a large can sell down very low and still make an insane profit. But, for the people who are just holding and hoping for up, they are going to have an identical amount of token volume as they started with initially, meaning that the only gains they can make is when the market value is above their buying point and the traders know it. So, they can squeeze the buy and holders and see if they can scare them into selling for a loss, knowing that they themselves are always in the positive.
But, this is hard to explain to someone who hears about the volatility and feels only fear, as they are going to not spend their time to understand the markets themselves, or the opportunity in them. Instead, they will go for the safer option of buy and hold or stay a no-coiner, while they stare at the charts and imagine the "what ifs" and for the no-coiners, read the news articles and laugh at those who have suffered a 50% drop in their value, even though they are up 500% over the year. And, if that person holds another year, they might lose another 50%, but a year later, be up 1000% more.
As I have said before, there is an alignment of time to consider, as well as the resolution across time. Zooming in on a short period of time is going to see a lot of ups and downs, but zooming out shows quite a different story.
That is the last five years of the market cap of crypto. 17 billion to 1.7 trillion, or 100x or, 10,000%, whichever way works for you. While still small, it has moved from a handful of tokens to thousands of projects and every day, innovations are being made and new business models developed to flesh it out from an oddity, to an industry.
From evolution, to revolution - volatility is part of the process.
Taraz
[ Gen1: Hive ]