The movement of capital into or out of cryptocurrency assets driven primarily by the anticipation of future price changes rather than by fundamental valuation or utility. These flows are characterized by a higher risk tolerance and shorter time horizons.
Mechanism
Speculative flows are often initiated by retail traders, hedge funds, or algorithmic strategies seeking to capitalize on short-term market trends, volatility, or news events. These movements can lead to rapid price swings, increased market liquidity, and contribute to market cycles.
Methodology
Participants identify and react to speculative flows by monitoring technical indicators, market sentiment, and social media trends. Understanding these flows is crucial for assessing market momentum, identifying potential bubbles or corrections, and adjusting trading strategies accordingly.
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