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Why is the crypto market very volatile

Dec 5, 2022
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Marketing Batman

One of the main skills that every player in the crypto market should have is the ability to feel the mood of the market. It helps to make successful transactions that bring big profits.

One of the most important indicators that you should pay attention to when analyzing the bitcoin and other cryptocurrency market is its volatility. Volatility is a market parameter that reflects the degree of fluctuation of assets and coins over a certain time period.

By studying the volatility of a particular currency, a player on the crypto market is able to assess the risks of investing in a coin and build an effective earning strategy based on this.

Let’s take a closer look at what affects the market volatility indicators, and what are the reasons for the instability of the currency in the crypto market.

What makes bitcoin market so volatile – one of the most popular questions among traders

Why is crypto market so volatile

  • The market will be unstable if it is immature.
    It is important to understand that in relation to, for example, the stock market, the cryptocurrency market is still immature. It was formed relatively recently and continues to develop every day. The cryptocurrency market is a very mobile and dynamic system that is constantly growing and expanding.
  • Even those news that do not relate to the crypto market can affect it.
    The cryptocurrency market, like the stock market, does not exclude the influence of the human factor. Or, to be more precise, the social factor. This means that the liquidity and stability of cryptocurrencies are primarily affected by events that take place in society, politics and the economy. Just one tweet of a popular person, who at least indirectly speaks about some kind of cryptocurrency, can both raise and lower the value of this currency in a matter of minutes. The cryptocurrency market is extremely sensitive to external factors, therefore, in order to be a successful player in the market, you need to be aware of not only crypto news, but also global events in general.
  • Manipulation in the crypto market.
    Unfortunately, manipulation in the cryptocurrency market is extremely popular. Lack of any control on individual sites leads to chaos. And this leads to the fact that the cryptocurrency volatility indicator is growing. There are players who artificially manipulate coin rates, wanting to get as much profit as possible at the expense of inexperienced traders.
  • Big players can turn the market upside down.
    Owners of a large share of assets can significantly influence the state of the market if they decide on large sales or purchases of coins. Such large players are usually called whales. Whales to some extent provide both market stability and volatility.

Why are cryptocurrencies so popular despite the fact that the crypto market is very volatile

Despite their volatility, cryptocurrencies, including bitcoin, continue to maintain their popularity, and the market is constantly growing. Of course, volatility suggests that a coin can lose value dramatically at some point. However, the coin can also rise in value quickly.Traders take advantage of this characteristic of a volatile market and profit when cryptocurrencies are expensive. But for this you need to buy it when it was low in value. This is the beauty and complexity of trading. It is difficult to build an effective portfolio of assets, however, when it starts to generate income due to market volatility, you feel why you spent so much time and effort.

Crypto traders ways to profit from even the most volatile cryptocurrency on the market

Why  the bitcoin market is so volatile

It may seem that the volatility of the crypto market will not affect large coins such as bitcoin. However, bitcoin is still quite a volatile coin. And as strange as it may sound, this is due to its popularity. Bitcoin is constantly on the buzz, discussed by influential people, so it has a constant impact on him. Large corporations are large holders of bitcoins, so their actions and decisions affect the stability of the coin.

Of course, if you look at the last few years, the cost of bitcoin almost always only grows, but the coin still remains volatile. Blindly buying bitcoins and counting on the fact that the rate will grow indefinitely is not worth it. One way or another, Bitcoin will be a volatile coin, because, unlike the classical currency, it is not backed by gold.

Is it worth investing in cryptocurrencies, in particular bitcoin, in the near future? This question is of interest to both those who have been involved in the cryptocurrency market for many years, and those who just want to enter the field of the crypto market.

We have compiled for you the top reasons why you should consider the cryptocurrency market as a way to make money:

Constant growth of assets The volume of capitalization of the cryptocurrency market is constantly growing. This means that you should not postpone entering the market, act decisively, but wisely.
Even large companies are not afraid to invest in crypto Many successful companies have decided to invest large amounts of money in cryptocurrencies. These are the giants of the financial and technological market. They not only invest their own money, but also help the cryptocurrency develop by introducing cryptocurrency as a valid source for buying their goods and services.
There are many cryptocurrencies that have great prospects and growth points. There are many very promising cryptocurrencies on the market today that have an attractive value. Having studied the risks and benefits, you can invest in the coin that will pay off your investment several times in the future.
Lots of information and experts Today, there are many useful resources and analytical publications that help novice crypto traders get acquainted with the mechanism of the market. New traders do not feel as lost as novice traders 10 years ago.
Cryptocurrencies help save savings By investing in more or less classic cryptocurrencies, you can save assets from inflation and theft.

Despite the fact that today’s time can be described as a crypto winter, the forecast for the bitcoin rate is favorable. In the next few years, a bull market is likely to be expected, which means an increase in the value of such popular coins as Bitcoin. However, you need to be very careful when investing in cryptocurrencies by doing enough analytics and studying reliable sources, such as our blog.