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Volatility: The Necessary Evil Of Cryptocurrency And How To Handle It

Part of what has cemented cryptocurrencies on the map since they exploded into the mainstream investor market has been their volatility. Investors flooded to the likes of Bitcoinwhen, through November and December 2018, the value of the cryptocurrency increased in value exponentially.

However, such volatility is a two-edged sword, and the cryptocurrency market has shown that in 2018 with Bitcoin’s price shedding more than 50 percent at times from its year end price of $13,000.

Volatility should be at the center of attention if there is to be a future in which crypto is used widely in day-to-day instances. However, it requires a lot of bravery, and some tactical know-how, to successfully navigate the lows, in order to keep oneself safe, and sane, as well as contribute positively to a burgeoning crypto economy.

Stories of Bitcoin billionaires and overnight millionaires cropped up, and the individual investors flooded to be a part of the massive wave of Bitcoin mania. This is why volatility was so important in establishing cryptocurrencies as a potential asset that could also be adopted as a currency in mainstream society. However, this same volatility is also what could kill that goal. The problem is, if people enter crypto when the market is at its most Bullish, profiting off the upward volatility, they need to be strong enough to stomach it at its most Bearish, and the volatility takes a big down swing.

Just like in the cryptocurrency space, there are long term investments and short term investments in the stock market. Roger Ma, founder at Lifelaidout, a certified financial planning company in New York, explained how, in stocks, it is important to not forget about your time horizon:

"Investing in stocks rewards you in the long term. These day-to-day changes in the market shouldn't affect you." This reflects very much in the same vein as the so-called ‘Hodl’ strategy for cryptocurrencies. Essentially, the strategy says that there is no need to let ‘day-to-day changes affect you’ rather just hold onto your cryptocurrency to avoid the volatility altogether.

There is evidence to suggest the volatility of Bitcoin is lessening, that the wild swings are not as wild, and that they are in fact getting more manageable over time. This has a lot to do with the rise in adoption and the distribution of Bitcoin across a vast and varied market.

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