Why Is The Price of Bitcoin and Other Cryptocurrencies So Volatile?

At the beginning of this year, cryptocurrency entered into a bull run, reaching its all-time high ($65,000) with most of the investors cautiously flocking up the market. They were rewarded with handsome returns. However, during the next few months, the markets witnessed massive crashes across almost all the cryptocurrencies- Bitcoin tumbling down almost 50% of its price value by the end of May. Even after the markets recovered, the volatility could be seen over the following months. 

Nevertheless, the cryptocurrency prices made the media headlines again last week owing to its fresh all-time high mark ($68,000). With this rapid rate of fluctuations, the ever-so-unpredictable prices of cryptocurrency have shown volatile trends. For a beginner, managing between the eruptive gains and thunderous crashes is quite nerve-racking. Though the factor of volatility is a variable that is widely understood and accepted in the investment markets. It reflects that all investments carry risk. On the other hand, this very variable could be responsible to reap huge benefits if comprehended well. It is always a good idea to join online apps like Bitcoin Evolution or immediate edge review to get the latest insights and info about cryptocurrencies.

Interpreting the crypto volatility

The last few years have been particularly a wild ride for millions of global crypto investors. While many of them managed to make a fortune from the huge upswings, there have been many who lost in the bursting bubbles of market downturns. To understand how to promote crypto during such uncertain times, you should be acquainted with the factors that influence digital currency prices. Then, it could be conveniently put to advantage to harness maximum potentials out of it. Since crypto is in its nascent stages of development relative to other investment tools and currency forms, investors tend to experiment while making for the bull run and creating wealth out of it. This creates an environment of panic and confusion when the markets take a dip. The present year’s trends are a perfect example of the scenario. However, there are other factors too that decide the price trajectories:

Liquidity

As of now, cryptocurrency is very much limited to trading only. Its utility for spending and buying goods, or availing services is gathering pace gradually. Rather than holding onto the currency, making it liquid in the market would push its credibility, and win trust among stakeholders. Many businesses ranging across almost all verticals- restaurants, groceries, retail, online stores, gas pumps, and others are deliberately switching over to crypto-based payments.

Scantiness

The blockchain has been thriving on cryptocurrencies’ finite mechanism. For instance- During its launch, the creators of Bitcoin had announced a total of pre-determined 21 million coins to be mined. As of today, 2,130,731.3 Bitcoins are left to be mined. What happens after the target of mining is achieved? Experts speculate that there would exist a scarcity of the coins, raising its prices sky-high. Other intricacies of the business, like the burning mechanism, would also consume a part of supply coins, destroying them in the process, creating a further scenario of inadequateness, thereby elevating the prices.

Big whales

These are those accounts that are responsible for holding huge amounts of coins. When these accounts begin the process of selling, the coin prices crash, creating mayhem in the markets. This influence also triggers panic-trading and ultimate chaos.

Conclusion

Apart from the listed factors, media stories about lack of regulation, security breaches, investor panic, and government crackdowns also play a pivotal role in maintaining the volatility of the markets. However, you must understand that cryptocurrencies are a long-term investment that needs strategy and deep comprehension of the basics. Gradual regulation, improvement in technology, and maturity in terms of outlook could result in Bitcoin evolution. Lastly, crypto can only gain the trust and acceptance of the larger community of investors when it is supported by the government, financial institutions.