Many people are interested in the difference between the cryptocurrency market, the stock market in the United States and Russia, the futures and options markets, and the foreign exchange market. You need to analyze the actual data and your own personal experience to make an unambiguous conclusion.
First of all, I would like to note that the cryptocurrency market is quite young. The main movements began in 2014, when everyone who at least somehow connected with financial markets began to pay attention to it.
Other markets are much older, so a couple of words about their history until 2014 and later. As a practicing trader, I will evaluate markets from the point of view of technical analysis and analysis of trading volumes.
After 2008, global financial markets have changed dramatically, not all traders and investors were able to adjust their trading and investment approaches and adapt to these changes.
The 2008 crisis marked the end of an era of long and recoilless movements that brought traders profit in the past, for example, on employment data outside the US agricultural sector.
At some points, the market remained in place after a quick move up and down to bring down stop losses around the trading range. These changes can be attributed to futures and major currencies. As for trading volumes, large players can now hide them, showing only a portion of the position in a glass, which is misleading bidders.
Such orders were called “icebergs” because of their similarity with floating ice floes – the major players show only the top of the application, while the bulk of it remains invisible. I think that now you understand what problems traders have when making trading decisions.
Since 2010, all these changes have been very pronounced. The emergence of deep compensations of aisles has led to the need for work “in two directions” – when the price breaks through one or another range and can suddenly return to it.
The cryptocurrency market is very similar to the stock market, because they both have an investment component and their movements also depend on fundamental data – news on a particular coin, as well as stocks, for example, Apple. Such markets are also called unilateral interest markets.
As for futures, in this market it is not possible to see continuous movements in one direction now, since its participants may take different sides. Some traders predict the growth of the euro and buy it, while others may buy the dollar in the same pair for the same reasons.
The cryptocurrency market shows a different picture. It is very important to understand the reason for investing in this or that coin. For the most part, investors are investing in technology and the future prospects of the project. This forces traders to keep their trades, thereby creating an advantage in money in one direction or another. Due to this, long-term directional movements appear on the market, investors and traders have the opportunity to build a medium and long-term work strategy.
The second feature of the cryptocurrency market concerns the formation of open interest. After long-term observations, it becomes clear why the digital currency market can move in one direction without additional volumes to load into the current position. This is because the initial position of the coin is formed over time significantly longer than in any other market. The market may be in a side trend for several months – as a result, the volumes that have been loaded during this time are sufficient for the implementation of a long-term trend.
The average accumulation time for a position is a week and a half, while on the futures market this period is two days. The more time it takes to accumulate, the stronger and longer the directed movement will be.
There are also visual differences in the cumulative structures of the cryptocurrency market and the futures market. When trading with cryptocurrencies, the side trend often does not have a clear outline and is tilted in that direction. Let me remind you that we are talking about the most liquid instruments of the top 20 cryptocurrencies. It is on them that most of the transactions are made and since the thinking of the main mass of traders is stereotyped and, accordingly, more predictable, the actions of most market participants are easier to analyze and predict.
The cryptocurrency market also has a number of similarities with most financial markets. Before the start of movement in one direction or another, the market forms areas with traders locked in, the liquidity of which smart market participants need to form their positions. This is very clearly seen when the market begins to redistribute the accumulated volumes, forming an area with a seizure of liquidity from a large number of traders.
An important role for the cryptocurrency market is played by the absence of its full regulation by the authorities. Of course, this is not the main factor, in my opinion, it only affects the influx of new investments. It has no effect on market formations by itself. Everything will be the same, but market participants will be able to occupy both sides.
We should not forget, however, that the cryptographic fundamentally differs from the traditional use of new technologies, which only a few years ago were inaccessible to financiers and market enthusiasts.
For me, when I first met the cryptocurrency market at the beginning of 2014, it seemed to be some kind of super-advanced alien technology and its participants were real Martians.
Now, when financiers and traders are gradually beginning to understand the prospects for the crypto market and the technology of the blockchain as a whole, you need to be patient and continue to expand acceptance and knowledge about them. Due to the constant variability of market situation, the conditions for trading in a cryptocurrency market have to be adjusted at least once every three months, but the basic principles of its operation differ little from traditional financial markets.
Trading skills, knowledge of the principles of investing and the psychology of traders, as well as the ability to distinguish upward, downward and lateral trends will give a cryptocurrency investor virtually unlimited opportunities for profit, especially with competent hedging and diversification of the cryptocurrency portfolio. Also, do not forget about reinvesting profits in interesting and promising investment projects and startups.