Renowned cryptocurrency expert Lark Davis recently shared crucial insights on navigating the volatile but lucrative world of crypto trading. Collected by the CoinSpeech team, below is a summary of the most significant points from his latest appearance. You can find Lark Davis’s new video embedded below.
Why Volatility is Your Friend
One of Lark’s main points centered around embracing the inherent volatility of the cryptocurrency market. He emphasized, “Volatility is your friend whether you want to believe it or not. It’s true. In fact, you should actively seek it out.”
He explained that while stability might sound appealing, especially for those who have already met their wealth goals, seeking out volatile markets is essential for those looking to grow their wealth. “You want to buy as low as possible and sell as high as possible, and volatility helps that happen,” Lark stated.
Altcoin Trading: Higher Risks, Higher Rewards
Lark highlighted that for smaller investors, venturing into altcoins is a logical step. He said, “It makes sense to move out along the altcoin risk curve where returns can be higher.” However, he warned that, “trading altcoins is pretty damn nuts,” and underscored the importance of understanding the volatile nature of these assets.
He provided a key insight into why altcoins are so volatile: “Altcoins are truly exotic, crazy. A whole heap of unknowns are attached, questionable reputations are attached, uncertainty around what they actually do.”
The Role of Market Cap
Lark discussed the significance of market cap in contributing to volatility. “For example, Bitcoin has a market cap of around $1.4 trillion,” he noted. In stark contrast, altcoins with much lower market caps like Bit Tensor, which has a market cap of around $2.8 billion, exhibit much higher volatility.
Deeper into the altcoin spectrum, where market caps drop to single-digit millions, “even just one big buyer can easily shift the price by multiple X’s,” Lark pointed out.
The Power of Narratives
Another key point was the impact of narratives on altcoin volatility. “Crypto narratives are the stories that are being told to make people want to actually throw their hard-earned money into these assets,” Lark explained.
He pointed to various market cycles and how different narratives drive price movements. For instance, in this cycle, “we have narratives around artificial intelligence, real-world assets, decentralized physical infrastructure networks, and the meme coin super cycle.”
Bitcoin as the Benchmark
Lark borrowed a term from traditional finance to explain how altcoins relate to Bitcoin. “Altcoins basically have a high beta value in relation to Bitcoin as The Benchmark. They move much faster up and much faster down,” he remarked.
This high beta trait of altcoins means they often react more strongly to bullish Bitcoin movements, but independent trends can also emerge, especially with the influx of new tokens like meme coins.
Categories of Altcoins
Understanding the different categories of altcoins is crucial. Major alternative layer ones, utility projects, and meme coins all exhibit varying levels of volatility. “After ETH, we have the major alternative layer ones like Solana and Avalanche,” Lark said, and then highlighted the extreme swings in smaller, more volatile meme coins.
What Bitcoin Teaches Us
Lark concluded by comparing Bitcoin to altcoins to highlight what differentiates it and what traders should look out for. “Bitcoin was the first. It’s listed on every major centralized crypto exchange where there’s plenty of liquidity for it,” he noted. These traits make Bitcoin far less volatile than the myriad of new altcoins appearing regularly.
“The further from those same boxes a new coin is, the more volatility you can probably expect,” Lark explained, reinforcing the idea that understanding these dynamics can turn volatility into a significant advantage.