Such high-frequency computers take microseconds to run algorithms and provide essential trading information. Retail investors can’t compete with such computers with high processing power while trading from home.
Large investment banks can use high-frequency algorithms to influence the trading system in several ways. One of them is using flash orders to run trades.
Thus, an investment bank may intercept crypto trades within microseconds before processing and selling them at a higher price than the original order. Algorithms can also disrupt the patterns of the cost to work against the typical trader analysis.
Dumb Money Does Not Drive the Crypto Markets
Individual traders compete against large institutions in a legacy market. Prominent players with huge budgets can purchase supercomputers or hire professional traders to work for them as a team full-time.
Small players in this zero-sum game might not have adequate resources for competing against more prominent players. However, Bitcoin trading has a lower entry barrier.
That means anybody can venture into Bitcoin trading with a few dollars. And with most crypto exchanges, traders can quickly meet minimal requirements for registration. Thus, the industry attracts more individual than institutional traders.
And most individual traders don’t operate as full-time traders. Amateur traders can also venture into the crypto trading world using automated software.
Dumb money refers to traders that purchase high and then sell low. That’s because they chase markets and purchase when prices increase, fearing they will miss out.
Unfortunately, they end up panic selling during the market crash. If dumb money drives a market, it becomes volatile. A trader can predict such a market if they know what they are doing.
Bitcoin and other cryptocurrencies are relatively innovative. Using the right tools and information, you can make good profits from your trading activity. Nevertheless, take your time to learn how cryptocurrencies work and the best ways to trade them