What Is An All Time High And Why Does It Matter?
Mar 12, 2021
The term All Time High (ATH) refers to the highest price that an asset has ever reached. The ATH price is regarded as the maximum price that a person could have sold a particular asset for and the maximum price that a buyer was willing to pay for that particular asset during a specific period. ATHs are important because stocks or cryptos that are consistently creating new ATHs are more likely to catch the attention of prospective investors.
The markets are continuously fluctuating day in and day out, and there are a myriad of factors that cause these price fluctuations, the main one being supply and demand. If there is a larger number of buyers than sellers (more demand), the larger number of buyers will cause prices to rise. Conversely, a larger number of sellers will cause prices to fall.
Market volatility refers to the rate at which the price of an asset, stock, currency, etc, fluctuates (moves up or down in price). Volatility is often used to measure the risk of an investment. The more volatile the price, the more risky the investment. If the price fluctuates rapidly in a short period of time, then it is deemed to have a high volatility. If the prices fluctuate slowly over a longer period of time, then it is deemed to have low volatility.
Volatility often gets a bad name, which is understandable as it is most definitely not for the faint hearted. It’s important to note however that volatility is not always a bad thing. Volatility keeps investor’s money moving, often providing great opportunities to buy low and sell high, resulting in highly profitable portfolios.
Market volatility in relation to crypto
Just like in any other market, volatility is an important factor in measuring risk in the crypto market. Due to various factors including the digital nature, limited level of regulation, and substantially smaller market size in relation to other markets, cryptocurrencies will naturally be far more volatile than most other asset classes.
In turn, this high level of volatility actually attracts many investors as it is often possible to make large returns in short time periods, compared to other asset classes. Like any asset class though, over time the volatility in the crypto markets will decrease as the market expands and as more regulation is introduced.
There are volatility indexes that measure volatility of some of the larger cryptos, the most important being the Bitcoin Volatility Index (BVOL).
Make sure you keep an eye on that volatility, and be sure not to buy Bitcoin at an All Time High! Remember the old trading adage: Buy low, sell high.
Good luck, and always do your own research.
(All trading involves risk. Losses can exceed deposits.)