Why Is The Crypto Market So Volatile

We all know about Bitcoin because it has been in the market since 2009. There is nothing more exciting than the efficiency of Bitcoin, as it is based on the very modern Blockchain technology. Despite this, Cryptocurrencies are still unknown to people. 

Most of us just know the name, and that’s it. 

However, before we get to talking about that, there’s something you should know in this aspect beforehand. Trading is not a consistent market, and the same goes for Cryptocurrencies. 

But there is a huge difference between Crypto trading and the traditional trading process. The traditional reading depends on economic inflation, but Crypto trading depends on supply and demand, and we should know that Cryptocurrency is limited.

We do not have much awareness because we fear when it’s about money, and the young generation is fragile with this process. To understand the trading process better and gain ultimate knowledge about Cryptocurrency, you can follow saitama v2 price prediction

Why Is The Crypto Market Volatile?

The Crypto market is volatile for various reasons, and one of them is that it is a trading platform. However, Blockchain technology is also related to this process; thus, we cannot conclude the answer in one sentence. 

The world’s largest Cryptocurrency, Bitcoin, has recently lost its way and is now touching a low of $ 23,751, which was almost $64,000 in 2021. However, this particular data insists on the roughness of the Crypto market. 

A few important factors are related to Crypto volatility, and people are mostly concerned about those factors. For instance, the Crypto crash in 2018, the newness of the market, et cetera. Well, we have articulated some specific factors to express the volatility of this market. 

1. Utility

The price volatility of Cryptocurrency depends on how many people are grabbing Crypto coins and how they are using those coins. For instance, if you have Crypto coins and you are just holding your coins by doing nothing, then the market price will get low. 

On the other hand, if you find someone who is spending crypto coins for buying or selling purposes of goods or services like in restaurants, then the market value of the coins will grow. So, it’s basically the demand and supply of the Cryptocurrency that is responsible for its market fluctuation. 

2. Scarcity

The supply of these currencies determines the scarcity of these coins. The Crypto mechanism is finite, and thus the total number of Bitcoins that can be mined is fixed, which is 21 million.

When more people collect this currency, the price automatically skyrockets. Few of the coins use a burning mechanism to insist one part of them be destroyed. In that way, they are trying to increase their market value. 

3. Whales

The accounts that hold a large number of coins are called the whales. This kind of account, as they hold many coins, can influence the market with their activities. 

For instance, when such accounts suddenly start selling their coins to the market, the market value goes down immediately. 

This kind of account is not very rare as many people succeed in life through Cryptocurrencies and trading. So, the chances are there of market volatility through these kinds of accounts. 

4. Purely Digital

Most of the popular Cryptocurrencies are fully digital, like Bitcoin, Ether, et cetera. So, there is no backing of physical commodities and currencies for these digital assets.

This is why these coins are fully dependent on the supply and demand process. If the market fluctuates, there will be no government support or any of their insurance to cover your loss. This increases the concern of market volatility without security. 

5. Developing Technology

Blockchain technology is still new in the market and thus Cryptocurrency. There is a lot to do to improvise the scalability of these digital currencies. The timeframe is very confusing, and if it does not validate with the smart contract, downward pressure appears.

It’s just a decade since the Bitcoin idea first evolved in the market. The technology has lots of drawbacks, and thus room for improvement is still under process.

We Are Concerned About Price Fluctuation

After the discussion of the above-mentioned points, we can easily understand that the Crypto market is volatile and why it is so volatile. We, the general people who are more into short-term and irregular investments, are concerned with price fluctuation.

Professional investors are more aware of the technology and its advancement and the forecasting of the market. Overall the Crypto market is volatile, and we need to be aware of the facts before we go and invent.

Jeremy Edwards
Jeremy Edwards
On Chain Analysis Data Engineer. Lives in sunny Perth, Australia. Investing and writing about Crypto since 2014.

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