Knowledge on fundamentals to help crypto traders ride volatility


Posted at May 24 2021 01:07 PM

Knowledge on fundamentals to help crypto traders ride volatility 1
A representation of virtual currency Bitcoin is seen in front of a stock graph in this illustration taken January 8, 2021. Dado Ruvic, Reuters/File Photo

MANILA - Traders of cryptocurrency should better understand the technology behind it to weather sudden drops in value and volatility, a financial consultant said Monday.

Bitcoin, which is among the most popular cryptocurrencies in the market, dropped to $32,000 over the weekend, or nearly 50 percent compared to this year's high of $64,800.

"Drops like these are not something new. It has happened over and over again...Similar to stocks, when you see drops, you always go back to the fundamentals," Stock Smarts president Marvin Germo told ANC.

"How much do you know about the token and the crypto that you’re coming into, the technology per se, not just the price fluctuations? How much do you know about the technology that in times of volatility, you know what you’re doing," he added. 

Volatility is likely "here to stay" for the crypto market since it is still in the early years, he said.

Despite the uncertainty, there is a lot of utility or uses for cryptocurrencies "as long as it does not change the technology," Germo said.

Cryptocurrencies have the potential to improve the way financial transactions are being done such as to speed up the process of sending money or remittances, he said.

"The ones that are really, really good I believe will survive any crash that we could possibly have," Germo said.

Traders, however, should be smart about investing as there are coins that have the tendency to fail. 

When asked what's good about bitcoin, Germo said it is scarce and that it is not inflationary.

Business tycoons, including SpaceX and Tesla CEO Elon Musk, have been expressing their thoughts on several virtual coins. 

Musk's recent Tweets on bitcoin and dogecoin, for example, have sent values surging or shrinking in an instant.

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