Dec 21, 2020

The Volatility Of Small Cryptocurrencies

Have you heard about the Dogecoin? Yes, it is named after that Doge. And it jumped 20% yesterday because Elon Musk mentioned it in some lighthearted twitter banter.

While Musk has tweeted about Dogecoin in the past, even calling it his "fav cryptocurrency", it's a great example how a random event can shift valuations of smaller cryptocurrencies. With Bitcoin it's not that simple, as you have significant news pretty much every other day, e.g. lately about various funds aiming to invest part of their assets in the cryptocurrency.

So any time you buy smaller cryptocurrencies, be prepared for a ride. As an easy hint check how the currency's Bitcoin exchange rate evolved over the past few months before buying it. If you see a constant downward pattern, you might want to reconsider your purchase. Buying Bitcoin or Ethereum instead might make more sense.