Stability In The Crypto Trading Market

The Search For Stability In the Crypto Trading Markets

Forex pairs are one currency valued against another. Cryptos (tokens rather than stablecoins) are also valued this way, as Bitcoin for example can be BTC/USD, BTC/EUR and so on. A difference is that Forex pairs are more more like against like than a Crypto currency pairs is. However it is possible to see this like against like, when Cryptos are valued against each other, which is how many are traded.

One can look for divergences in the Crypto Pair, for example Bitcoin from another Coin and perhaps draw conclusions about overvalued or undervalued Cryptos. This may work better in a Bull than a Bear market, as a Bear market is something pulling Bitcoin down and hence the entire market, except where news or sudden ape sentiment can push a crypto up. A Bear market seems more like one where there isn't any direction per se, rather a kind of collapse of liquidity, like what can happen in a Forex Pair when it drops from liquidity flows. But behind this collapse of liquidity, something of belief in Coins remains, resulting in the capacity to rally.

One couldn't really do this (divergences) in terms of Crypto Currency Pairs, as there is no particular reason for seeing a Cryptocurrency to be overvalued or undervalued in terms of a currency (what currency is Bitcoin tied to ?). But perhaps this will change, as Cryptos become more widely adopted and more utilised as a currency, rather than for pure speculation, driven by intense sentiment, one way or another. So the forces which push up or down Dollar, for example, could also affect Bitcoin, if only from a perceived similarity in function.

It would not seem to be the case that this is currently so, even though Bitcoin is tied into the wider economy in the way other Cryptos are not, except in the sense that they are tied to Bitcoin. However the alternative for this, is that the Crypto ecosystem, which uses Cryptos as a currency grows and becomes more functionally complex. In this sense the economy of this ecosystem may have a more profound and a decoupling influence on Bitcoin. Perhaps this is the more likely outcome for Bitcoin a things currently stand.

Forex pairs cannot do this, they are so tied into everything and processed in many ways. If they move too far, corrective actions are taken leading to retracements (which is why they tend to be traded on shorter term horizons than Stocks, for example). This might well be the fate for Bitcoin, and therefore other currencies, but it may be done in a different ways, if the ecosystem can truly develop. In many ways this is a great opportunity for Cryptos, to have their own economy and to make their own future, as it were. The alternative would suggest that this is a laudable goal, even more so.

This flux in the functionality of Crypto can be seen as inducing intense volatility. Forex Pairs are well established and do not tend to evidence this kind of volatility, except at news events. What Forex Pairs do show, is trends, ranges, essentailly volatile structure which comes from the myriad influences on the Pair, pulling it one way and another.

This makes for a relatively stable but very complex market, where intense volatility is constrained to specific events, normally. Indeed that level of intensity tends to be restrained in time, that is sharp volatile moves in a direction from a news event can end within a minute or so. Cryptos on the other hand can show intense ape sentiment or news sentiment moves lasting hours or longer.

As a trading market, Forex has a kind of eternal nature, with similar bites of structure to be seen as you go up and down time frames. Cryptos are searching for structure, in a sense, latching onto to the only ones which have a kind of structure, that is Bitcoin or Ether. In the Bull market, other Coins became drivers for a while, driven by belief in their functionality, which evaporated after the second ATH for Bitcoin, but only to some extent. So building functional structure for Cryptos is an end in itself, when seen in terms of the whole, the trading market of Cryptos, providing stability in a very volatile market.