Although the first cryptocurrency Bitcoin was only first introduced in 2008, the cryptocurrencies sector today has become the fastest growing sector of the financial market. Today, there are more than 800 different types of cryptocurrencies in existence. Nevertheless, only a dozen or so of these “alt coins” are widely accepted and traded. Interest in cryptocurrency trading grew when many investors sought to use Bitcoin as a safe haven of wealth when the credit crisis broke in Europe. With investors’ confidence in fiat currencies such as the U.S dollar and Euro at an all time, cryptocurrencies became the natural choice for a storehouse of value, due the belief that Governments would be unable to manipulate these cryptocurrencies.show more
As the value of a single Bitcoin rises about the price of gold, many investors began to see opportunities cryptocurrencies investments. As Bitcoin prices surged beyond the reach of normal investors, cheaper and more affordable cryptocurrencies such as Ethereum, Litecoin and Monero also began to attract the attention of investors. Since then, the value of these frequently traded cryptocurrencies has grown by leaps and bounds. For example within a period of 16 months, the value of Ethereum has grown from $0.90 in 2015 to over $90 by January 2017. In terms of percentage gains, this translates into a 10,000% return!
Nevertheless, it should be noted that the value of cryptocurrencies are extremely volatile. Because of the extreme volatility of cryptocurrencies value, trading in cryptocurrencies is extremely risky as well. This makes it even more crucial for a cryptocurrency investor to keep a close watch on his cryptocurrencies charts.
Unlike forex charts and stocks charts which are typically used to determine if the market is overbought or oversold, Cryptocurrencies charts are normally used as comparison charts against Bitcoin and the U.S dollar as well as to show the total market capitalization. Because of the extreme volatility of cryptocurrencies, it is often difficult to make any meaningful analysis from the price movements of these cryptocurrencies.
In addition, there are major unknown factors surrounding the trading of these virtual currencies. Since there is no central authority involved in managing these virtual currencies, any government can outright ban the trading of these alt currencies with their jurisdiction. This is precisely what China did when it banned Bitcoin trading in the country. As a result, the value of cryptocurrencies plunged by as much as 20% within a single day. Fortunately, most of the regulatory agencies around have taken the same step as China did.