The demand for cryptocurrencies is increasing at a fast rate with the rise in technology. Many business persons and investors prefer investing in digital currency because it is highly profitable. However, the risk of losing money is also there due to its volatile prices.
There are numerous reasons behind the unpredictability of digital currency prices. In this article, we will discuss all the factors that influence the cost of the cryptocurrency. When it comes to trading, many people do not know how to begin their journey. Visit this site to find out some essential tips for every beginner.
Nowadays, more people are getting interested in digital currency. Due to this, various platforms have been developed to provide related services to the users. Click here to get access to all the information regarding the market.
This information will further help people to increase their profits. Investors also need to learn more about the unpredictability of cryptocurrency prices. We have prepared this article to discuss all the factors that are responsible for the volatile rates. So, without further ado, let’s get into it.
What are the reasons for the volatility of digital currency prices?
1. The cryptocurrency market is still developing
The crypto market is growing faster in the past few years. However. It is not fully developed. The market is not so large that it can ensure profitability for the people. It is one of the main reasons that its prices are not fixed. As the market is small, the smaller forces can control the rates.
Therefore, one cannot predict if the rate is going to increase or decrease. Many people often hesitate while investing in cryptocurrencies like bitcoins due to this. But the market will grow potentially in the future because there are many new opportunities for the investors.
2. Available in digital form only
Bitcoins act as a digital asset for any owner. It is impossible to transform a digital currency into a physical one. So, their prices depend on supply and demand. People always look at the supply to decide on investing in virtual currency.
In the world of cryptocurrency, there is no involvement of the government. Their rates are set according to the people owning the bitcoins. The rate is likely to fall when people decide to sell their digital coins in the market. On the contrary, if they buy more, the prices might increase.
3. Technology is still progressing
One cannot say that the technology used for virtual currency is developed. It still has a long way to go. It has not been a long time since cryptocurrency was introduced. Therefore, blockchain technology is not developed as it seems to some people. Whenever a problem or issue arises in the blockchain, the prices also get impacted.
If it is not solved in time, then it creates trouble in the whole market. The arrival of any problem is unpredictable, and so is the rate of bitcoins. Despite this, the technology is progressing by new methods day by day. It won’t be a problem in the future.
4. Speculation is involved
The involvement of speculation in the cryptocurrency market the most significant factor for volatile prices. All the investors speculate about digital currency. Then, make their decision whether they want to sell existing coins or purchase more.
The assumptions made by the traders impact the cost of bitcoins. Many experts believe that speculation is beneficial to earn more money in the market. Investors might be doing this because of this reason. So, the prices cannot be stable under any circumstance.
5. Media is responsible
Media plays a crucial role in affecting the cost of digital currency. Well, there are many things behind it. When the rates drop or rise in the market, the media is always the first platform to spread the information.
Investors also prefer to get updated with the latest trends and news with the help of the media. Sometimes, they don’t get reliable news and fall into the trap. The situation gets changed as people start participating in buying and selling crypto.
It is beneficial for people to follow trustworthy media houses to get the latest information about the market. Social media platforms such as Facebook, Twitter, Instagram, etc., also contribute to spreading fake news.
6. Open investor profile
One doesn’t need to be professional to begin the trading journey in the digital currency market. It is not the case with stock exchanges and real estate as there are restrictions for traders.
Anyone can begin cryptocurrency trading with a bit of knowledge. There is no need to have a trading license, a specific amount of capital, or hire a lawyer. An individual just needs some money and a stable internet connection for crypto trading.
In traditional markets, a new trader is always scared of the outcome due to uncertainty. On the contrary, trading with bitcoins is pretty simple for beginners as well.
7. Market without institutional “big money”
According to a survey, almost all institutional investors invest in bitcoins. However, they prefer to spend more money in other traditional markets.
It is because there are fewer rules and regulations in crypto trading as compared to others. As there is no institutional “big money” in the market, the prices are always volatile.
8. Less store value
Yes, the value of bitcoins is indeed growing with time. But many experts think that they should not be stored for a long time. The store value is not as good as it seems to look to the people.
As a result, investors are now focusing on buying the coins and selling them within a short period. They don’t want to store the virtual currency in their wallets for so long. It causes high volatility in the prices of bitcoins.
Final Thoughts
In the end, we have concluded that there are so many factors behind the volatility of crypto prices. Every individual who is interested in cryptocurrency trading must know these factors precisely. With this knowledge, he or she can make the decisions accordingly. Despite these reasons, the future of bitcoins is brighter than others.
