How the rises and falls of cryptocurrencies can change your investment strategy

You have probably noticed that Bitcoin and Ethereum are experiencing spectacular price movements. This is not an anomaly: it is the normality of the crypto market. But instead of simply enduring these oscillations, it is time to understand how they occur and how to leverage them more wisely.

The first key: accept that the crypto market never closes

Unlike traditional stock exchanges with fixed hours, the cryptocurrency market operates continuously. From Monday to Sunday, day and night, it is active across all regions of the globe. This lack of pause means that a political announcement, a statement from a major investor, or a geopolitical crisis can trigger a price reaction within minutes, regardless of the time of day.

This nonstop operation intensifies market reactions. There is no time lag for market participants to gradually process information. The impact is almost instantaneous, whether bullish or bearish.

When liquidity weakens, prices soar in all directions

A factor often underestimated in explaining volatility is liquidity. Simply put, good liquidity means you can buy or sell in volume without causing major shocks. However, many cryptocurrencies lack sufficient liquidity.

When a large order enters the market (especially from “whales,” these major holders), it can be enough to significantly move prices. This is especially true for less traded assets. This imbalance between supply and demand creates pronounced and sudden movements.

News and emotions: the true drivers of oscillations

The crypto sector reacts disproportionately to information. A simple statement from a regulatory authority, a positive adoption announcement by a major company, or approval of cryptocurrency ETFs can trigger impressive chain reactions.

Since a large part of investors are individuals rather than institutions, emotional charge outweighs rational analysis. Fear and greed spread quickly, leading to impulsive behaviors that further fuel volatility.

The behavior of individual investors: the invisible amplifier

Many individuals enter the crypto market without a prior strategy, attracted by the promise of quick gains. When prices start to fall, panic takes over and leads to panic selling, realizing losses. Conversely, during rapid rises, FOMO (fear of missing out) pushes thousands of people to enter, creating an artificial bubble.

These behavioral dynamics produce exaggerated price movements, often without clear technical fundamentals behind them.

Ethereum: the example embodying volatility

Ethereum perfectly illustrates these phenomena. The second-largest cryptocurrency in the world is currently trading at $2.98K with a +1.01% increase over 24 hours. However, its longer-term movements show the reality of the market: a -6.85% decline in seven days.

In the past, Ethereum has experienced drops exceeding 13% in a week, followed by partial rebounds in just a few hours. Such movements would take months on traditional markets but unfold within hours here.

Developing a conscious approach to navigate these turbulences

Volatility is not a curse but a characteristic of the crypto market that also creates opportunities. Savvy investors do not seek to predict every movement but to understand the mechanisms behind them.

Some solid principles make the difference: favor assets with good liquidity, build a diversified portfolio, maintain a reserve in stablecoins, and resist passing emotional impulses. The key is not to have perfect timing but to have a clear understanding of risks and to recognize that in this market, volatility is not an exception: it is the normal functioning.