Cryptocurrency Price Volatility

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The volatility of the cryptocurrency market has often been looked at by many as one of the many bad sides of cryptocurrency and some view it as something that wouldn't guarantee an investor peace of mind as cryptocurrency market fluctuations is something that is really on a next level, the market is often subject to rapid fluctuations which affects many people who are invested in it making some huge gains while others massive loss sometimes almost unrecoverable.

The market is a volatile one and sometimes they are no assurances that's why we are often been advised not to invest more than what we are willing to loss to avoid the emotional damage that goes when things goes south is always good to have some backup and not to leave everything or our whole means of living in the market that will be so wrong due to its unsure nature.

The market is volatile and it's no surprise as even the first cryptocurrency Bitcoin is quiet a volatile asset class so others as well are often affected by Bitcoin moves some times are even more volatile than Bitcoin.

Today I would like us to look at some of the factors contributing to the volatility in the cryptocurrency market this is what I will be focusing on today.

Let's get into it.

Factors influencing the volatility in the crypto market

One of the things that often influence price volatility in the cryptocurrency market centers majorly on the the economic concept of supply and demand which is often unavoidable most times.

When a demand for an asset is high typically the prices would likely go up and when the supply is high with less demand the price would drop so this also applies to the cryptocurrency market as often when there are rapid surge in price like in the upside is often due to high demands in the price of that asset, with the insane demand it often leads to mad increments and this move could be rather rapid which often causes volatile move and other times too when the supply becomes higher than the demand the price could also drop rather sharply more than we thought possible or had anticipated so supply and demand is one of the factors contributing to cryptocurrency market volatility.

Cryptocurrency market as we have often heard is also a highly speculative market that's to say it's often associated with some hypes and sometimes when a coin has been hyped or look at as having the potential to do well even without or before making any real move you will buyers and investors stacked up to invest in this coin in anticipation of good price movement in the future with the hope of good returns and this investment is made on pure speculations most times and often when people massively invest on a speculative coin it makes it to rise that is to drive the price of that asset up often in a rather sharp upward movement which increases volatility as well.

Also cryptocurrency is often being looked by some countries as something illegal and sometimes too this influence the market like for instance if 2021 the last bull run year when China ban Bitcoin blaming the mining process for the reason this action caused Bitcoin to dump and enter a bear market in the middle of a bull market though Bitcoin later recovered and made a high that same year but almost the rest of other coins didn't atleast not enough to create another all time high.

So my point being that regulatory news most times from a big nation could really affect price in the market and when they are negative it could cause price to take a rather rapid turn downard really sharply in an way we don't expect and to levels we never thought possible so regulatory news is a major factor that influences the volatility of the cryptocurrency market.

The cryptocurrency market is also considerably a young market in comparison to the traditional market like the stocks and bonds and for this reason whales in the market are easily able to influence price some times to suit them and this happens when they buy up rather large chunk of an asset they most likely make that asset rise even when there is no reason fundamentally for it to and sometimes too they can dump sometimes they buy to make people believe the price is going up and then when others but in they would sell off and dump the market on them, this is called market manipulations making people to buy in on a market that's going down and this often causes much volatility as the market would have enough liquidity to sell of exactly as those whales intended.

Some of the major exchanges too contribute to volatility in the market, how so? This exchanges are centralized and most are not really as secured and become targets of those who wished to gain access to people's funds and often we hear about and exchange being hacked and millions in dollars is being stolen along with users data this right here is one other major contributing factors of the mad volatility witnessed in the cryptocurrency market

So security issues especially when it results to such losses causes dumps in the market as this stolen funds are floated and there is sell off resulting in mad drop in price so security issues especially those of centralized exchanges becomes a rather strong influencing factor that contributes immensely to the mad volatility in the cryptocurrency market.

When a project also works on the development of it's asset and brings mad technological innovations it could help impact the volatility of that coin by making it appreciate more rapidly than it would have otherwise which is also a contribution to the volatile cryptocurrency market.

These are all the reasons I believe the cryptocurrency market is volatile, some I feel can be managed whilst others I thought there is much we can do about it.

Conclusion

Anyone coming into the cryptocurrency market must brace for impacts, true there are some that are in avoidable even in traditional assets like stocks and that's the concept of demand and supply as it affects it too infact other assets traded in the financial market are all relatively volatile just that cryptocurrency is the most volatile for now out of all of them so you need experience to operate here so as not to be burnt or left holding the bag.