Finances

Why is the Cryptocurrency Market so Volatile?

Img source: unsplash.com
Written by Quentin Hack

All of you may know about the rising of a new market of cryptocurrencies all over the world. It’s a unique asset that was developed first by Satoshi Nakamoto. Satoshi Nakamoto is a Japanese who implemented the first blockchain to invent Bitcoin, a cryptocurrency.

This digital asset is a kind of virtual money that can make payments in exchange for goods and services.

To understand the market of cryptocurrencies like Bitcoin, Ripple, Ethereum, and more, we need to understand the risks. As we all know , the market is changing every day and all over the world. Some countries don’t even know yet how to handle such a market or this virtual currency which brings so many risks with it and is free from centralized methods of governments. It is also not connected to standard flows of finance.

If a person is interested in investing in cryptocurrency, he should learn about the main features of this market. First, there are differences in it and other financial needs. You can use the same strategy with your trade in the stock market. The main difference is that the values aren’t determined with those same factors.

The leader of the market is BTC,  with its current price of $55,000. Though in this market, there is a tendency for the continuation of growth over time. Therefore it can not be taken with surprise that many people are interested in trading with this market.

In trading with cryptocurrencies, you might notice the frequent changes in values day by day and very high volatility. This is also the first reason for its being popular among investors in the first place. If you want to trade in cryptocurrency, you can sign in to QuantumAI login and start trading now.

Let’s analyze more about this topic in this article.

Img source: pexels.com

Decentralized market

As we previously mentioned, this market becomes unique because of its decentralization and not being connected to standard financial flows. Cryptocurrency is also not typically backed with any physical money. This digital asset represents a value of itself. This value is related to technical features such as safety, transparency, and speed of transactions. In this matter, demand and supply play a higher role in determining its value than with the other types of assets available in the market.

Some Predictions

It is essential to read analyses given by experts to know about risks and potentials related to trading assets; you should be aware that a portion of these predictions is provided by people participating in the market. It is not that rare that some large investors are trying to share some news about the potential of cryptocurrencies they have invested huge money in. Besides, speculations should also be frequent, like with stocks.

Still, there are some advantages to this factor. You can be a day trader and earn profit by selling and buying highly volatile units per day. You can also combine this activity and withholding some companies which have a great potential to grow over time.

Now, everyone is trying to find cheap and new crypto which might someday reach the same value as BTC. Some units with great potentials, such as Tron, Ren, Ripple, Stellar, and more.

Img source: pexels.com

Still New Market

These blockchain-based currencies have only been for around 12 years yet. This tells us that this market is very young, and there is a lot of space for significant changes and developments. Some countries recently started to use the blockchain system that is fully integrated into standard financial flows. Yes, most countries still lack laws and regulations for this market. That may lead to uncertainty and potential risks. For example, if a country with a strong economy bans cryptocurrency, that will undoubtedly lead to having adverse effects on values.

We can see that many countries’ governments are already working towards implementing these assets fully. For example, BTC and other cryptos in the US are being treated as properties; now, you will have to pay taxes after selling it in the market. These taxes will be for capital gain. The taxed amount is the difference in value it reaches from when you buy it to when you sell it.

In this very young market, there still is a lot of space for improvements. People have just started making standard payments using their e-wallets, but still, most people invest in cryptocurrencies only because they expect a potential profit.

However, the values grow more with the increase of using digital wallets globally.

Role of media

Similar to predictions and speculations, the media’s role is also vital, and it can affect the values also. For instance, we can find lots of articles that are saying that the price of BTC will hit $100,000 by 2025. On the other hand, some may have a suspicion about this market. There are some deficiencies, but those can also be solved using some regulations and laws related to the market and the owners of digital wallets.

Img source: unsplash.com

Great competition

The fact that today there are around 2,000 cryptos available in the world market is causing frequent changes in these values. There is this main risk with small and cheap units that big investors can affect their values if they invest a significant amount of money and sell them after the growth in prices. Their activities could lead to sudden and substantial changes in development and a faster drop in value when they choose to sell all their assets in a short period.

Moreover, there can be some new cryptocurrencies in upcoming times with excellency of technical features, which will attract considerable investment.

Therefore, combining different units that will increase the chances of making profits is the best option.

Conclusion

The best way to become a successful trader in this crypto market is to be aware of many factors at the same time that may affect the prices.  For this, keep reading the news and try to be one step ahead of other investors so you can make the right choice at the right time.

About the author

Quentin Hack