Types Of Growth In The Crypto Market

Fundamentals in Crypto

There are three different types of growth in the crypto market, and if you are a crypto trader, it is essential to distinguish between them. These three types are Inflationary, Speculative, and Actual growth. Combine this knowledge with solid fundamental and technical analysis and ably it to your trades while managing your risk, and you will be able to maximize your profits and be more accurate with your predictions.

Inflationary Growth:

Bitcoin has the ability to move the crypto market as a whole. It’s no wonder since it’s the first cryptocurrency ever created and still has the most significant share of the total crypto market evaluation (as for now). And for that reason, altcoins tend to follow Bitcoin’s price whenever it goes up or down. It’s usually bitcoin that leads the market whenever it attracts more capital, and some of that capital will leak into the altcoin market, which causes prices to rise likewise.

Similarly, when Bitcoin loses its’ capital, and the money outflow is greater than the inflow, that causes the price to drop. Consequently, altcoins suffer too and usually drop even lower due to the higher risk associated with trading altcoins.

The is the most common type of growth in the crypto market. A trader can take advantage of this growth by trading short to medium-term trades and carefully applying risk management rules.

As an investor, you shouldn’t be focused on this type of growth because it doesn’t matter over the long term. Instead, investors look for long-term gains and always look for investments that have strong fundamentals.


Speculatory Growth:

Have you ever heard “buy the rumors, sell the news”? This is basically it. Traders always keep their eyes open for announcements of any new projects, partnerships, and upgrades for networks, because they want to take advantage of it and invest in these projects before they see their prices go up.

For example:

A cryptocurrency like Dogecoin, despite its’ many deficiencies_ read Galaxy Digital research (Dogecoin: The most Honest Sh*tcoin)_ attracted a significant number of supports and built a large community. Dogecoin’s Twitter account has over 1.5 Million followers and still growing. Plus, the community has chosen Elon Musk _one of the richest men in the world_ to be the CEO of Dogecoin.

Musk himself has over 55.6M followers on Twitter. Some of these followers are big on Dogecoin, and Musk himself never shied away from showing his support to Dogecoin and the community. As I mentioned earlier, despite its many deficiencies, Dogecoin’s price has outperformed every major digital asset year to date due to the high speculation.

Speculatory growth can be the most significant growth in the short term. Still, markets tend to go back to actual evaluation levels over more extended periods and can even become undervalued.

Traders must approach this type of growth very carefully due to its high volatility and high-risk factor. Liquidation events that occur when traders lose all their money on these types of trades are very common. Therefore, any trader who wishes to trade must have very strict risk management rules because one simple mistake can lead to losing 50% of your total capital, and it could be even worse.


Actual Growth:

Actual Growth is the healthiest type of growth, as you’ve expected. First, it means that the project has been reaching one milestone after another. Second, it means that the team behind the project is putting in the necessary energy and effort to advance and improve the project. Therefore, it’s vital to do your research before choosing the coin or the company you wish to invest your hard-earned money with it.

Look for actual value, use cases, adoption, and partnerships. They are all significant factors.

For example:

Ethereum announced an upgrade for the network, ETH 2.0. This upgrade will bring Ethereum into the mainstream and help adoption. In addition, they aim to increase the number of transactions to 1000s per second compared to about 15 transactions per second. Their next goal is to make the protocol more secure against all forms of attack. Their final aim is to make the technology more sustainable and environmentally friendly by using less energy and computing power.

Phase 0 was launched on 1 December 2020, and the price of 1 ETH was around $586.16. Since then, they’ve had three more upgrades, Istanbul on December 8th, 2019, Muir Glacier on January 1st, 2020, and Berlin on April 15th, 2021.

By May 12th, 2021, 1 Eth reached $4380.64. That’s more than 600+% growth. It is considered a healthy growth since you can see the number of users on the network increasing. More users mean more value is being traded between participants, and more applications are being built on the Ethereum network more than ever before.

Long-term traders love to trade this type of growth because it doesn’t require you to check your trades every day. As a result, they can have open trades for weeks without worrying about the day-to-day fluctuations in the market.

Long-term investors also tend to enjoy this type of growth because it reduces the risk of volatility over the long term and benefits significantly from it, simply by buying and holding their investments over the years, even could be decades.


In Conclusion:

It’s necessary to be able to distinguish between the three types. However, there is no right or wrong approach to trading and investing. Each person has his/her own assumptions and believes—we all analyze the market differently from one another. Someone might see the value in one project and not see it in another project that his best friend is investing in.
Always be careful, and approach the market with a strategy. Having a strategy is always better than not having one.


Would you like to read more articles? Here you go:
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