Cryptocurrency markets are highly dynamic global financial markets, offering unprecedented opportunities for active traders and investors. Helping cryptocurrency investors identify new opportunities and manage risk in this emerging and volatile space.
Why do price trends exist in cryptocurrency markets?
While it is difficult to pinpoint the exact reasons for the persistence of price trends in markets, there are several factors related to the cryptocurrency market:
1. Lack of investor attention
Cryptocurrency markets operate 24/7, which drains the attention of investors who may not fully follow developments.
Many market participants are non-professional individual investors who have other daily responsibilities, resulting in delayed reactions to news and price changes, creating opportunities for speculators who rely on momentum.
2. Automatic mechanical trading
Trading using leverage and stop-loss orders leads to the phenomenon of mechanical trading.
When prices move in a certain direction for a long period, stop-loss orders may be triggered or leveraged traders may close their positions, which reinforces buying or selling in the direction of the price movement, thus supporting momentum trends.
3. Network Effect
Cryptocurrencies such as Bitcoin and Ethereum rely on the network effect, meaning that the value of these currencies increases as the number of users and developers in the ecosystem increases.
This accelerated growth supports momentum as it attracts new investors, leading to continued upward trends.
4. Delay in updating views
Investor behavior is often characterized by delay in adjusting views and sticking to previous beliefs.
The cryptocurrency market is more polarized than traditional markets, which leads some investors to stick to old views despite price changes.
For example, an investor may believe that the market is in an upward cycle while prices are heading downward, or vice versa.
Why do price trends persist?
Thanks to the above factors, price trends in digital markets can be expected to continue, making momentum indicators a useful strategic tool for digital asset managers.
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Note: The views expressed in this article are personal and do not necessarily reflect the views of the parties involved or their partners.