Anyone who engages in the cryptocurrency world knows about its unstable nature. Experts mentioned that of all the investment ventures that people hope to take part in, cryptocurrency is the riskiest one and has stirred some fears among its people. This is because crypto has features and processes that are unique when compared to other traditional investment places such as traditional stocks. In cryptocurrency, the transactions are peer-to-peer, which means there are no middlemen such as banks or the government. The downside is that you need to take responsibility for your assets because losing your wallet key means saying goodbye to your hard-earned funds. This up and down behaviour and crashes lead back to the question: why is cryptocurrency unstable? Read on to know what experts think about the stability in the crypto world.
Cryptocurrency
The cryptocurrency market is widely known for its potential profits, producing the list of crypto billionaires. Aside from the earnings crypto enthusiasts may earn, cryptocurrency is also known for its other feature: its highly volatile nature. This means that the values of the cryptos in the market change from time to time; one day, the prices are high, and then the next day, it would suffer from a decline. Since the development of the first cryptocurrency, this fluctuating nature has been the number one problem among crypto traders.
There have been numerous cases of crypto traders and investors suffering from a huge loss due to crypto’s volatile nature – not to mention the additional cases of vast losses brought by crypto scams and hacking that happen online. Brought about by fear of these cases, some traders prefer to engage in secure platforms such as Binance, Bitcoin Loophole, Kraken and many others. This platform allows traders to connect with top-notch brokers that are equipped with tools such as auto trading platforms, automation robots, and many more to ensure a safe and effective trading experience.
The world of cryptocurrency consists of ways to earn, such as trading and investing. However, it’s not as easy as depositing money and waiting for it to grow – you need proper knowledge and skills to survive and keep up with its ever-changing nature. While you may know someone who earned from crypto or you experienced consistent earnings, it’s not a guarantee that it will never change because the crypto market is unpredictable.
Reasons Why Crypto Is Not Stable
Throughout the years, cryptocurrency has proven its volatility. Since the development of Bitcoin up to the last few weeks, it has been a wild ride for everyone in the crypto market. Due to this, one question that might be troubling most investors is why the cryptocurrency is so volatile? To give you an idea, we’ve come up with reasons why crypto is not stable.
1. The Developing Market
The cryptocurrency market is still developing and gaining increased popularity among those interested in cryptocurrency. Despite all the media attention that it gained since the birth of cryptocurrencies and the events which dominated the world of business, the market is still tiny compared to traditional currencies. This means that everyone can influence the trade process – including those traders who hold large amounts of assets. Even if these people do not trade and only sell cryptos, their presence and mini actions would be enough to crash the whole market.
2. Predictions
Believe it or not, the cryptocurrency market game revolves around making predictions. Investors predict from time to time if the prices will go up or go down and would serve as their basis for making profits. These predictions can influence the volatility of the market since they can cause a sudden influx of money in or out. This holds especially true when influencers or celebrities publicised their support or decline of a certain coin; this is what happened when Elon Musk tweeted about Dogecoin.
3. Purely Digital Asset
Most cryptocurrencies are purely digital assets with no backing of any physical currency. This means that the values of the cryptocurrencies are that the market solely relies on the laws of supply and demand. Since crypto is not associated with third-party agents like the government, various reasons may lead to a fluctuation in demand or supply.
4. Investors
Compared to other investment ventures such as stocks or real estate, the cryptocurrency market does not require its people to be experts before entering the field. Due to this, some part-timers are investing in it to make quick profits. However, while some part-timers are patient and try again when they fail, some part-timers immediately withdraw from the market when they fail to earn profits. When you put those who quit altogether, the frequent involvement of part-timers in crypto and their withdrawal is also why the market is unstable.
Crypto Market Volatility
Most crypto enthusiasts who engage or observe the crypto market can agree when it comes to its volatile nature. There is no right way to measure the crypto price volatility; however, you just need to glance through and learn how to read price charts to see that the skyrocketing values and depressive declines happen at a quicker and more extreme pace in the crypto market over the last few years.
In 2016, Bitcoin’s value reached 125% and increased again in 2017 by more than 2,000%. However, due to the market’s volatility, this high price and all-time price suffered a decline after a few months. In 2021, this crypto again set an all-time high, which is more than triple the peak price it reached in 2017. This alone shows the up and down values of the cryptocurrency market.
Despite all this, experts believe that there are signs that the volatile nature of cryptocurrency is turning a corner. Institutional investors and trading business firms are beginning to engage in this industry with more conviction and are prepared to tackle the fluctuating nature of crypto. This comes along with the worldwide effect of cryptocurrencies taking shape as part of the development and expansion of the wider crypto market ecosystem and the effect of crypto on the economy.
Conclusion
It seems like you can’t mention cryptocurrency without a follow-up‘ volatile nature’ after it. The values of the digital coins in the market suffer from a constant change, and we’ve listed above the possible causes of it. Over the years, crypto enthusiast individuals and firms have learned how to approach or handle the volatile nature of the market by constantly enhancing their skills to keep up with the ever-changing industry. While there is no certain news or accurate predictions on whether the market will be stable soon, it hasn’t affected the decision and passion of millions of crypto traders and investors to remain in the market.
