It has been stated by various digital currency experts and analysts as well s found by those involved in this sector, that the nature of crypto currency which is quite unstable or unreliable, makes it one of the best investment opportunities. If it is done in a proper and well thought out way, it can generate a huge amount of profit.
In the market today, there is a presence of a wide range of cryptocurrency varieties but they’re all not the same. Some cryptocurrencies can be said to be more unreliable or volatile than the other ones. However, it is important to keep in mind that with more volatility, the risk of investing in it also rises.
A look at the volatile nature of crypto currency
It is needless to say that the presence of such volatility and such unreliability in the cryptocurrencies have brought about certain drawbacks for it as well. Those who were interested in it, are however afraid of investing in ut as they are reluctant to get involved in it for the risks involved.
In addition to that, as the cryptocurrency market is going through a constant price change, incorporating it or using it as a medium of exchange, especially in the retail market has become a next to impossible task. There are numerous reasons or factors that contribute to this volatile nature of cryptocurrency and these have been discussed at length in this article.
Understanding the law of demand and supply
These two terms are entities, that can never be trusted. These are not always stagnant and are subject to constant change. Therefore, they can be termed as quite unpredictable. In the cryptocurrency market, like in any other market, the prices go up or down depending upon the supply and demand. Therefore, the changes in demand can be said to be a major factor for the crypto being so volatile.
The absence of regulatory frameworks
It is needless to say that crypto money is not regulated by any governing bodies such as the government. When it comes to fiat money, it is the government that ensures stability and is responsible for controlling it. Measures are even taken when there is deflation or any such troubles.
However, in the case of cryptocurrency, there are no such regulations that can keep the market stable or in control. Thus, it becomes a probe to instability and volatility. They also go up and down in price very quickly.
What are some of the speculation that contributes to its volatility?
It can be said that the future of trading, depends upon the speculation that arises in the people. When people involved in the trade visualize or sense a possible decline in the market, they attempt to sell it as soon as possible. This is done to avoid any sort of losses they might have to bear if they do not sell them soon.
This dependency on the masses as well s the media for new regard for the market, and their role of them as such an important factor in deciding the selling of crypto, adds to the volatility of the coins.
It is quite understandable from the nature of the cryptocurrency, that the more it is accepted or used by companies, its value rises all the more. There have been various instances where well-known companies have expressed an interest in the use of cryptocurrency as a medium of trade. It has completely transformed the dynamics of the crypto market.
However, it is quite impossible to predict or even assume which cryptocurrency would be in use or in demand at a given time, which further adds up to its volatile nature.