It is a pretty complex task to understand the volatility of cryptocurrency markets. There are various reasons behind the same, and in this article, we will discuss all of them in detail. The world of cryptocurrencies is gaining a lot of attention these days. People from different geographical locations are interested in investing in digital currencies. Although it has not been so much time since they came into this world, the market is increasing day by day.
If we talk about volatility, it has pros as well as cons. Some investors think that high unpredictability in the market is essential. On the contrary, others believe that volatile prices decrease the profit potential. What do you think about it? Indeed, there have been many past incidents when investors have benefited due to the sudden increase in cryptocurrencies value.
The best thing about trading in digital currencies is that you have plenty of platforms to choose a suitable one. All you have to do is research well before deciding on any one platform. But if you want to make your task easier, you can visit bitcoinprimeapp.com/se. You won’t be disappointed after using their reliable services.
You might be surprised to know that various factors influence the unpredictability of crypto markets. But what are they? Don’t worry. We will cover everything regarding the same. Let’s dive right into it without wasting any more time.
What are the reasons behind the high volatility of the cryptocurrency market?
The following points might help you understand it more precisely-
1. Intrinsic value is not there:
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Believe it or not, digital currencies do not have an inherent value. It means that one cannot value them in any way possible. The primary reason behind it is that it is much different from traditional currency. You can use traditional money anywhere. However, it is not the case with digital cash or coins.
It is impossible to find out how much money you should spend on buying it. Investors do it according to their budget or looking at the market conditions. Still, they don’t know if they are making a good investment or not. So, the role of the market comes into play.
2. The crypto market is still in the development stage:
Have you ever thought that cryptocurrency markets are in the beginning stage? If not, you should consider this fact. As we mentioned earlier, it has not been a long time since virtual currencies came into this world. Many people are still unaware of them and don’t have much knowledge about them. Even some beginner investors enter the market without learning anything about cryptos.
All this shows that the market is in the progress stage. It needs to gain more attention from other people. Due to this reason, the prices remain unpredictable and get affected because of smaller forces. Experts claim that the digital currency market will increase in the future, but it still has not been confirmed yet. So, we will see what unravels ahead in the world of cryptos.
3. Lack of regulatory oversight:
Source: marketwatch.com
The cryptocurrency market is not regulated by the government or banks. There are some rules and regulations for trading, but they are not followed everywhere. So, investors often feel a bit anxious to put their money on buying bitcoins. A lot of risks are involved in investing in digital currencies. Anything can happen in the market. You will either win profits or incur losses.
In such conditions, market manipulation occurs that contributes to unpredictability. In the future, it might be possible that some regulations will control the prices. However, it has not been decided till now. People are always assuming various things related to cryptos.
4. Institutional big money is not present:
Institutional investors prefer investing in other markets rather than cryptos. As a large amount of investment is not there, the crypto market gets highly volatile. One cannot resolve this issue as long as institutional companies build their trust in virtual currencies.
5. Store value is not impressive:
Source: information-age.com
You might already know that the store value of various digital currencies is not as remarkable as it seems to be. Many experts also advise other traders not to hold their virtual currencies for so long. This advice makes them vulnerable to sell them within a short period. The whole situation of buying less and selling more creates high volatility in the market.
Also, there is a risk of them being stolen from digital wallets. Therefore, more and more people hesitate to keep bitcoins in their wallets for long. Some investors stop dealing with them due to an increased amount of risks.
6. Speculation creates chaos:
Cryptocurrency trading is always based on belief. Almost all the investors and business people who have invested in digital currencies assume they should buy or sell them. This speculation is one of the reasons why the market is volatile.
What are the advantages of cryptocurrency trading?
Source: blog.finjan.com
If you want to know if trading is a good option for you or not, you can consider the following benefits:
- Never-ending excitement: You won’t find that much excitement anywhere than in cryptocurrency trading. Also, the profit potential is high due to increased volatility.
- Decentralized currency: Digital currencies are decentralized because there is no involvement of banks or the government. There are not many rules and regulations that can restrict anyone from buying or selling cryptos.
- Fast transactions: All the transactions are free from restrictions. As a result, the speed of the transactions is fast.
- More convenient: You will find plenty of websites and platforms for cryptocurrency trading. The best thing is you can use them on any device.
- Fast account opening: You don’t have to go through a long process while making an account on a platform. The platform will ask you for some details, and you are ready to go.
The Bottom Line
Cryptocurrency trading is indeed profitable. However, one needs to understand why the market is so volatile. You should keep learning about the market as long as you are a part of it.
