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Why Are Cryptocurrency Prices So Volatile

Source: butterflylabs.com

We are all aware of the nature of this newly regulated investment marker, that it is highly unpredictable. People have their views and a lot of debate goes on. The industry was not known by many, before the wake of the pandemic, but the last two years have been crazy, worldwide.

The market witnessed several upswings and many have made considerable gains by leveraging the situation and making the most of it. You can check the current market prices at https://www.okx.com/markets/prices.

Additionally, many lost their small investments made in the market because of several abrupt downturns.

We understand that there are several reasons which make the market highly volatile and this nature refrains so many people from investing in it. In our article today, we discuss several reasons that make the cryptocurrency market highly volatile and unpredictable.

All-Digital Asset

Source: marca.com

Most of the cryptocurrencies available in the industry are completely digital, Bitcoin being one of the best examples. Additionally, they are not backed by something physical, nor a commodity or currency.

It means that the price of cryptos is determined completely based on demand and supply. As far as the supply of such currencies, especially Bitcoin is predictable, the price varies based on the number of people who are interested in buying the currency, right at the moment.

The value of cryptos is not backed by the government or any kind of physical asset, and it states that the value of cryptos is enforced by faith. If people start believing that the value of particular crypto will not rise, they will more likely sell it off. If others get convinced and start selling too, the price will fluctuate and vice versa.

Not Yet Stable

Source: cryptofinancestudio.com

Besides the huge media attention that the digital currency has gathered over the years, its industry size is minute as compared to that of gold or other fiat currencies. Even when it was at its peak, the industry stood at around $800 billion. This change was regarded as a loose one as compared to the total value of the other similar industry, like gold.

When it is said that the crypto industry is still emerging, it means that people have numerous opportunities to bang the industry with numerous exciting and new projects. That said, any business can plan to enter a new and emerging industry. Doing so is one of the best ways to get people talking about your products and interest more to invest. This will help your product become recognized and known.

Assumptions

Source: zdnet.com

Speculation is one of the major and biggest drivers of the cryptocurrency industry, today. It means that several investors bet that the act of buying and selling impacts the price of cryptos regulating the industry.

That said, it is because of the volatile nature of this industry that investors get to obtain the maximum benefits. Speculative traders get attracted to this industry and they are always after making a good amount of money by simply guessing the swings.

Keep in mind that if you ever plan to short sell crypto just before it crashes, you will get a chance to attain gains from it too. Investors often try to contemplate the swings of the cryptocurrency market to try and make the most of what it has to offer. Such speculative bets placed by the investors in this market make the already choppy market, more volatile.

Profile Of Investors In This Market

One of the factors worth considering in the crypto market is the profile of investors in this market. As compared to other similar markets like real estate or the stock market, the barriers to entering the crypto market are minimal.

The best part about buying and selling on this market is that you don’t need minimum capital investment, a trading license or a lawyer to get started.

All you need is an active internet connection and only a few bucks to get started. This is one of the reasons why most amateur traders across the globe are leaning towards investing in this market. Having said that, if you take a closer look at the investor profile of this market, on average you will see that it has far less educated and experienced investors, as compared to others.

Technology Is Still Developing

Source: vaughantoday.ca

Blockchain along with other similar technologies is still in the development phase, and the developers are learning how to make improvements, every day. It was just a decade ago that this kind of currency was introduced, and it will take some more time for the market to mature.

Though, several businesses have adopted this new technology and are already engaging with it by actively leveraging it for advertising and marketing purposes.

Now and then numerous new currencies enter this highly volatile market and they always look forward to competing with the already existing options. The whole idea is to take some market share from the ones that already prevail in the market.

Breaches In Terms Of Security

Source: bitcoinist.com

The price of cryptocurrency can become unstable because of the flaws in the security of this market. Developers may make an effort to find remedies for the flaws, but they may end up breaching them. Crypto and open-source software development are usually based on the same core principle, the users should be able to use the source code, moreover, they should be encouraged to do so.

This way the community can make sure that all concerns related to the software design are brought to attention.

What The Future Holds?

Source: reviewgeek.com

We just saw that the bitcoin market is highly unpredictable and no one can say what will happen the very next minute. The only certain thing is that the industry has grabbed global attention, and taken the investment industry by storm.

The elements that are influencing the crypto industry and making it volatile at the moment can alter in the future with its evolution. Though the investors of this industry are highly optimistic and they are always hoping for regulations in the future.

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