In this video we'll dive into how the cryptocurrency market works as well as what effects the price
of crypto currencies.
This information is very useful as it helps you develop a strong mindset so you can easily maximize
your profit while lowering your risk.
So how does the cryptocurrency market actually work similar to other asset classes.
The price of crypto currencies is driven mainly by two main factors the supply and demand and the greed
and fear of investors.
Now let's talk about the supply and demand first at a basic level the price of crypto currencies is
driven by its availability the scarcer crypto currency is the higher its price levels.
On the other hand a cryptocurrency with an abundant supply will likely experience lower price levels.
So what can we learn from this experience.
Before buying any digital currency you should first look at its maximum supply.
If you look at bitcoin for example there are around 16 million bitcoins and there will never be more
than 21 million Bitcoins because of a hard coded limit by Bitcoins inventor so because of the scarcity
the price of bitcoin has reached so high and there's a high chance that its value will keep going higher
and higher in the future.
Just look at another coin such as Dejah bite or DGP be its maximum supply is over 21 billion coins.
Well you can expect this coin to reach $10000 per coin.
As you can see there's no scarcity here as everyone can have it.
Now let's take a look at the top 10 crypto currencies on the market right now.
If you do the math you'll find that if a coin wants to be in the top 10 its market cap must account
for at least one percent of the total market cap.
So how can we use this information to predict the future price of a coin that we want to invest in.
For example if you want to invest in a coin such as D-G bite just do the simple math first calculate
1 percent of the total market cap.
For example the total market cap is now $500 billion.
So one percent of it is $5 billion.
Now let's find the maximum supply of D-G byte which is 21 billion coins.
You can easily find this information on coin market cap dot.com.
Then you just need to take the 1 percent of the total market cap and divide it by the maximum supply
$5 billion divided by 21 billion coins is about 24 cents.
The price of DG By now is about 3 cents per coin.
So if this coin can reach the top 10 as an investor you can expect its value to increase to 24 cents
in the future.
The second factor that can affect the price of crypto currencies is the greed and fear of investors.
The most common mistake that many inexperienced investors and traders make is that they tend to trade
on emotions rather than on logic.
When these people make a profit they feel more and more greedy.
They think that they'll sell their coin when its value goes a bit higher.
And when its price reaches a new high they keep thinking that it will continue to go up even higher
and higher when the price starts to drop these people start panicking and they try to get out of the
market as soon as possible.
You see their investment decisions are influenced by their emotions their greed and fear.
Disciplined traders enter into a trade with an exit strategy in mind.
They know when the position should be exited and profit and when they should curtail their loss if the
position moves otherwise.
After several years of being a swing trader a value investor.
Here's what you can learn from my experience.
In most cases the price will not go up in a straight line but a series of spurts with retracement in
between the price tends to keep bouncing between support and resistance levels.
And if there's an uptrend it will create higher highs and higher lows.
So when the prices going up and then suddenly starts to drop.
Don't panic.
Chances are it will go up and reach a new high.
If you have no idea about support and resistance Don't worry we'll get into that later in the following
lectures.
Now just to make sure we're on the same page.
Let's take a look at a quick example.
The price of your coin will not go up in a straight line like this but it will keep bouncing between
support and resistance levels.
And if there's an uptrend it will create higher highs and higher lows.
So when you buy a coin and then its price suddenly drops don't panic.
Chances are it will go up and reach a new high.
From my experience the crypto currency market is very volatile.
The price of your coins can drop by 50 to 80 percent in one day.
Just don't panic if the drop is out of your control.
Maybe because of some bad news you have nothing to worry about.
The drop is just temporary because other investors were panicking and they sold their coins to get out
of the market as early as possible.
What you could do in this case is buy more at the dip and make a huge profit when the price recovers
in the next few days.
You see if you trade on emotions just like other inexperienced investors you'll hardly make a profit
in the next lecture.
I'll teach you my profitable cryptocurrency trading strategies so you can easily make a good profit
from your investments.