If you are a trader or have at least dabbled in the trading world, you would know that volatility is the lifeblood of any successful trader. Without volatility trades simply lie dormant. Even in a bear market, there are numerous opportunities to go long and vice versa. Markets don’t simply move in one direction, even if there is a clear and defined trend. Price action still moves up and down within the “channel” of any particular trend. What we are currently experiencing in the Bitcoin market is quite a significant rise in volatility.
This increase in volatility has very much to do with what is happening globally. Recent events in Canada and now Russia and Ukraine have the ability to move markets significantly. This is especially true of the current and ongoing Russian invasion of Ukraine. On the breaking of the news that Russia had officially invaded Ukraine, BTC collapsed approximately 10%, leaving many anticipating an aftershock.
Bitcoin Bounces Back
In less than 24 hours Bitcoin had bounced back to pre-invasion price levels, surprising many, including myself. One would expect a sell-off, perhaps even further losses as the situation continued. This is not to say that the market will not drop again, or even drop lower than the recent dip. However, it is evidence that market drops are over-exaggerated in the event of geopolitical tragedies. We saw a similar reaction in March of 2020. Investors and traders jump ship, which is further compounded by cascading liquidations, as margin calls prove to be a case of “too little too late”.
These events make for amazing trading opportunities. I have mentioned before that I personally picked up ETH at approximately $100 at the very bottom of the March 2020 dump. This has proved to be a tremendously powerful move but felt much like a weakness at the moment it was actually executed.
Is This Perhaps Not Opportunity In disguise?
Hodlers are probably becoming rather impatient and aggravated, as every time BTC breaks $40K, it is either rejected at $45K, or even $42K. Hodlers are currently in a position of stagnation. That being said, those willing to buy the bottoms of the recent dips are most likely gaining some ground. Traders however are most likely doing well, provided they have taken advantage of the 6% to 10% dips, as they have been coming through like a beautiful set on a morning beach break. This begs the question of whether trading might actually be the best approach to this current market?
Opportunity often comes dressed in overalls but also in the form of pain and catastrophe. When all is well, the opportunities have already been seized.
An Idea To Consider
It might be an idea to allocate a small percentage of one’s portfolio to trading, in order to take advantage of all the current volatility. Obviously, buying extreme lows would be the way to go about it. For leverage traders, shorting at key resistance levels once they reject a bullish move would definitely be the way to go. However, with such an increase in volatility also comes the aspect of unpredictability. This is quite a big one! When you have events taking place on such a large scale, anything can realistically happen!
This makes this an idea for those who already have some type of trading experience and not simply anyone wanting to benefit from the opportunities at hand. There are some great trading opportunities playing out but are definitely not for the inexperienced, especially when leverage trading. Those who have never traded futures are generally very ill-prepared for what they encounter on their maiden voyage!
Unfortunately, with calamity comes opportunity. Many of us would rather not see what is unfolding in our world taking place. However, that is not something that any of us can control. The only thing we can do is to find a way to extract something of value from these otherwise tragic events. The world is currently in a chapter of disaster and instability. This backdrop will continue to create volatility in financial and global markets and ultimately create significant opportunities for those willing to take educated and informed risks. This, as usual, is not investment advice. In times like this, it is even more imperative to ensure one does extensive research before entering any investment or trade.
Calamity can produce tremendous opportunities, it can also give birth to even more calamity. So, ensure you are aware of the potential risks and pitfalls. Thanks for taking the time to join me, see you in the next one!