It\u2019s a speculative asset, which means it has a limited history and price fluctuations. Still, crypto is an emerging market that\u2019s creating a space for itself in the world, with countries legalizing it and companies integrating blockchain technology into their payment processes. After an extended market rally saw the global cryptocurrency market capitalization top $3 trillion in late 2021, Bitcoin and other digital assets…<\/p>\n

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Both investments turned out to be as volatile as crypto, we just couldn\u2019t see the volatility \u2014 and concerned investors couldn\u2019t get out. There are some cryptocurrency power investors out there\u2014so big that many of us know them by name. And these investors (called \u201cwhales\u201d) control a good deal of the available coins, which means that their actions affect us all. If a whale makes a huge sale, it sparks questions for other investors, potentially causing them to follow suit and spur a decline in the price of bitcoin or other digital currencies. The same logic holds if someone buys huge sums of a specific cryptocurrency.<\/p>\n

The most prominent factor is the crypto markets\u2019 lack of trading volume. According to data from Blockchain.com, the total USD trading volume on major Bitcoin exchanges has hit a 30-day average low of $143.5 million, the lowest level since November 2020. When there is less buying and selling of Bitcoin, it often results in more subdued price movements. There are likely multiple causes for the unusually high volatility of cryptocurrencies. While more widespread adoption may be part of the solution, other likely causes are structural and follow directly from the way cryptocurrencies are designed. Large banks and other financial firms hold huge reserves of traditional currencies, and stocks have market makers, both serving to smooth out short-term volatility and make exchange markets more liquid.<\/p>\n

There have been six periods of significant decline in bitcoin since bitcoin\u2019s inception in 2009. As the amount of available coins increases, however, the price of those coins will drop because more people will have the incentive to buy them, and more of them will be willing to sell them. Thus, the market becomes more competitive, and prices may drop as a result.<\/p>\n

There are investors who are interested in crypto not to use it as a currency, but to use it as a hedge against inflation, or as an investment vehicle. But without anything intrinsically valuable backing up the currency, crypto\u2019s market value is based entirely on speculation, which is essentially educated guesswork. Once people consider the coin overvalued and lose money on it, the hype and speculation die and eventually lead to a price collapse as the bubble bursts. It’s quite common for cryptocurrencies to experience huge spikes and then crashes as a result. Influencers and celebrities also contribute to crypto price swings. For instance, Dogecoin plummeted by 91% after Elon Musk’s SNL appearance in May 2021.<\/p>\n

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Several Bitcoin community members decided to add laser eyes to some friends\u2019 avatars in hopes of fueling the entire crypto community to push bitcoin\u2019s price to a new ATH. If your cousin\u2019s new restaurant had tradable shares, they\u2019d probably be as volatile as crypto. Landing a liquor license might make them quadruple, while a bad review may make them tank.<\/p>\n","protected":false},"excerpt":{"rendered":"

The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. The content of this article is not a work product of any research department of Swissquote or its affiliates. This […]<\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":""},"categories":[463],"tags":[],"_links":{"self":[{"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/posts\/8166"}],"collection":[{"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/comments?post=8166"}],"version-history":[{"count":1,"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/posts\/8166\/revisions"}],"predecessor-version":[{"id":8167,"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/posts\/8166\/revisions\/8167"}],"wp:attachment":[{"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/media?parent=8166"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/categories?post=8166"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fraganciastudeseo.es\/wp-json\/wp\/v2\/tags?post=8166"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}