This article gives an answer to 5 reasons why crypto is volatile. Volatility is a good reason to scare new investors into entering these markets.
The cryptocurrency market has been volatile from the beginning, but recent years have been a particularly wild ride for millions of investors worldwide. Many have made millions with large explosions, yet many have lost large and small investments due to explosive bubbles and sudden market downturns.
However, marketers need to know how to promote cryptocurrencies in times of high volatility and investment uncertainty. To understand this, we need to identify the factors that affect the price of digital currency and how we can use it to our advantage.
Why are cryptocurrencies so volatile? These are the main reasons why the price of Bitcoin and other cryptocurrencies is so volatile.
#1 – Cryptocurrencies are unpredictable and risky
Since the future of cryptocurrency or virtual money cannot yet be foreseen, the question arises whether it is possible to store Bitcoin as an investment and monetary transaction or not. There are doubts about Bitcoin’s reliability, and therefore it is volatile. Perceptions of the value of Bitcoin in stocks vary, as does the need to exchange goods and services. Bitcoin’s status is also uncertain in terms of asset transfers from one side to the other. Because of this, apart from its widespread use, the value of Bitcoin is volatile. News and similar events also add value to Bitcoin.
People with large amounts of floating currency are also affected by Bitcoin volatility. People with more than $ 10 million in capital need to liquidate their position, but that shouldn’t take them off the market. The bad news is that they have to leave for a short 24 hours, which becomes stressful.
#2 – Institutional adoption in a relatively small market
Cryptocurrencies, especially bitcoins, are now considered a haven from market volatility and inflation. The current socio-economic climate also creates a situation where people have less money and are protected from market fluctuations.
The recent trend of listed companies is turning their money into cryptocurrency. The US payment company Square bought $ 50 million in bitcoin. Later, Micro Strategy, a U.S.-listed company, converted a $ 425 million cash reserve into bitcoins, considering them the most affordable store.
Since then, many companies have followed this trend. The company’s giants’ trust in cryptocurrencies has created more interest in digital currencies than other currencies and a store of value. Many online stores also became interested in this trend and show information regarding new trends in crypto. Some also make a video about crypto through the WooCommerce product video plugin to grab the attention of their visitors.
One reason Bitcoin may fluctuate against decree currencies is that its perceived value is maintained against decree currencies. Bitcoin has properties that look like gold. Limiting its production to a fixed BTC of 21 million depends on the design decision of the vital technology developers.
As this differs significantly from fiat currencies. Additionally, they are dynamically controlled by governments that want to maintain low inflation. Also, high employment, and exemplary growth by investing in capital resources. As fiat currencies show signs of strength or weakness, investors can define less bitcoin. in their belongings.
#3 – The technology is still developing
Blockchain and other alternative encryption technologies are still in their infancy. It is almost ten years since the idea of decentralized currencies based on cryptocurrencies was published in the Bitcoin White Paper, so it will take some time for the market to mature.
However, many companies have already adopted blockchain technology and actively use it for marketing and advertising purposes. The most promising projects in this area are AdEx, Brave, and Steem. Since many customers find the transparency and other advantages of the blockchain attractive, it can be gratifying to get to know this technology in brand marketing.
In particular, persistent technological barriers, such as the problem of blockchain scalability, are putting downward pressure on cryptocurrency prices if left unaddressed. Or if their consequences crystallize in the form of Internet congestion and high transaction costs.
On the other hand, revolutionary technological developments can stimulate the effect. These include structural advances such as Bitcoin’s lightning-fast network or new popular apps on blockchain platforms such as Ethereum. In addition, many new coins keep popping up that compete and want to take market share from established currencies.
#4 – Market without central regulation
In October 2020, the global digital payments company PayPal announced the introduction of cryptocurrency buying and selling features on its platform. The launch included four major convertible currencies, namely Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. PayPal has also announced plans to allow cryptocurrency transactions.
It is known that PayPal has 350 million users who can now use crypto as a payment method. Its 30 million merchants also can receive payments using crypto. PayPal is one of the critics of cryptocurrency as a stable currency. Now jumping on a cart is one of the biggest names. Along with other support and assistance from PayPal, the demand for the active class was higher, which contributed to the price increase.
In addition to PayPal, the company also owns another popular payment platform, Venmo, which brings cryptocurrency payments to 40 million users. Although these platforms are new to cryptocurrency, several other platforms are already expanding their cryptocurrency payment options. As many private investors want to use cryptocurrency as an exchange, many governments are also trying to regulate the market. In many countries, such as Japan, the USA, Germany, and others, cot coins are viewed positively.
#5 – Speculation in the media
One of the main reasons for the instability in the cryptocurrency market is speculation. This includes investor bets that the price of various cryptocurrencies will rise or fall when buying and selling cryptocurrencies. The volatility of the cryptocurrency market attracts speculative traders looking to raise big bucks in anticipation of fluctuations.
As cryptocurrency is a small market for digital assets with a lot of speculation, the media significantly impacts price changes. Speculators and investors are constantly watching the headlines of the following big news, which will soon start or collapse. When something is discovered, everyone knows that it is a race to buy or sell, and the fastest win and the slowest lose the most.
The media stories surrounding the cryptocurrency market are influencing prices too much. It doesn’t help that many in the cryptocurrency industry receive news from less reliable stores and social media.
Often, the media is eager to be the first to tell exciting news about the world of cryptocurrency. In this way, some traders have learned how to ride around the sights and shadows of Bitcoin in a wave of excitement and benefit from it. For example, if the price of cryptocurrency increases, the introduction of cryptocurrency as a method of payment for your trademark may cause advertising joy.
Finally, to give a decent answer to the high volatility in the crypto markets analysts have to consider several points. In short, these are:
- Unpredicability of the markets
- Growing interest of instutional buyers
- Young and developing technology
- No central regulation exists
- Speculation from media
All in all, the technology behind crypto called blockchain is here to stay and will have a growing share in the near future.
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