Steemit Crypto Academy Contest / S14W2 - Volatility in cryptocurrencies.

We have observed that volatility affects cryptocurrencies significantly. The volatility occurs in various time frames. The largest increases in price have been during the crypto bull markets which is typically led by Bitcoin (BTCUSDT). The alt coins typically follow Bitcoin's trends over the long-term. The largest drops in price occur after the bull market is over, which is called the crypto winter.

The volatility in price can be positive or negative for investors depending on what strategy an investor is using. Any investment is successful when investors buy at a low price and sell at a high price. However, many investors or traders try to profit too frequently (sometimes daily) and may end up with more losses than gains or perhaps only breaking even.

One strategy that can be implemented to avoid losses and to be a profitable investor is to take a step back and trade using the daily chart and the MACD indicator.

Looking at the chart above, we can see that the price of STEEMUSDT dropped from a high of about $0.3367 on November 9, 2023 down to a low of about $0.2369 on November 20,2023. However, STEEMUSDT has been recovering from that low since then. All of this occurred over the past month.

The MACD indicator can give investors/traders objective buy and sell points, so that they remain profitable and use the volatility to their advantage. The buy points occur when the blue MACD line crosses above the red signal line and when the first green bar appears in the histogram. The sell points occur when the blue MACD line crosses below the red signal line and when the first red bar appears in the histogram.

If a trader bought STEEMUSDT back on October 16, 2023 at a price of $0.1790 when the bullish crossover occurred on the MACD and then sold at the next bearish crossover (next red bar on the histogram) on November 17, 2023 at about $0.2569, the trader would have booked a profit of 43.5% in just about one month.

The MACD indicator is now showing another buy point as a bullish crossover and green bar emerged on December 9, 2023.

Traders can also use a more aggressive approach with the MACD indicator. Traders can possibly buy at lower prices and sell at higher prices when using the first change in color indicator on the histogram. For example, if we look back on the chart at October 13, 2023, we can see that the red bar on the histogram turned pink. This could be a buy point at about $.1692. Then a trader could sell when the dark green bars turn light green, at about $0.2555 on October 25, 2023. This would have resulted in a gain of 51% in only 12 days.

If the trader used the more aggressive approach, they would have bought in again on November 22, 2023 when the red bar turned pink at about $0.2387. They could hold the position until the dark green bars turn light green. Right now, they are sitting on a gain of 15.4% in just a few weeks based on today's price of $0.2755.

Overall, I think the volatility of cryptocurrencies still appears to be high. Cryptocurrencies are certainly more volatile than most stocks. However, this may change over the course of time. If cryptocurrencies become more mainstream and are viewed as solid investments for the long-term, then the volatility might be more in-line with equities (stocks). Until then, I expect high volatility for cryptocurrencies.