CRYPTOCURRENCIES are notoriously volatile – but why is it the case? This website has spoken to the experts on Bitcoin, Ethereum, Dogecoin, and Shiba Inu to find out.
The first cryptocurrency was created more than 10 years ago. Despite this, the crypto market continues to be highly volatile. Prices of cryptocurrencies can soar or plummet within hours. Corrections of 50 percent or more happen a few times a year to all the major cryptos. Here’s why there’s such volatility in the market.
There are a number of reasons behind the instability in the crypto market.
This website has spoken to three crypto experts to find out what influences such dramatic price fluctuations in the crypto world.
A finite amount of crypto coins are mined. These are largely held by a limited number of big investors in the market.
Marcus de Maria, Co-Founder and CEO of Investment Mastery, told This website: “Data shows that most coins are held in wallets and very few on exchanges, creating a lack of liquidity.
“If a bigger player wishes to buy or sell, the impact on price is quite large, hence the volatility.”
He added: “These larger players, called the “Whales”, tend to sell bigger amounts and push down the price in order to buy back cheaper.
“They can do this because of the lack of liquidity in the market. As the price goes down, smaller retail players tend to panic sell and the Whales seize the opportunity to accumulate again.”
A “gold rush mentality” is another reason behind the market’s volatility.
Some see investing in crypto as a get rich quick strategy.
Lots of investors “panic buying” cryptos can see prices unsustainably pushed up in a short space of time.
Katharine Wooller, managing director of Dacxi told This website: “Volatility in cryptocurrency is no different than forecourt prices in the recent petrol crisis.
“There a combination of real-time shortage and petrol buyers’ panic buying through FOMO [fear of missing out]pushing prices at the pump sky high.”
Messaging from Governments and notable figures can deter or attract investors, causing prices to change quickly.
China’s crackdown on cryptocurrencies, for example, has dramatically influenced the market.
In late September, the People’s Bank of China said all crypto-related activities were illegal in the country, which meant the price of many cryptos dramatically fell.
Comments from influential figures, such as Elon Musk, can have just. “Brinkwire Summary News”.