Understanding the volatility of cryptocurrencies
When people think of cryptocurrencies like Bitcoin and Ethereum, the first thing that comes to mind is their impressive values on the crypto market. As assets that are accepted on a wide scale, some people are careful with investing in them since their price is subject to change every once in a while.
Cryptocurrencies are decentralised assets which means that they are uncontrolled by financing companies and other regulatory bodies. Rather, their prices are influenced by several outside factors that also dictate their flow on the crypto market. This is the reason why their prices are subject to change whenever you use them when playing as a Bitcasino VIP.
Some people think of volatility as a strength while some see it as a risk. In case you haven’t heard much about it, here are a few things to understand about volatility and what it means in the crypto industry:
What is volatility?
Technically speaking, volatility is a term used to explain how much the price of an item is likely to fluctuate over time. It is how the price trends can shift upward or downward in terms of cryptocurrency and other assets.
By investing on a highly volatile asset, investors are faced with two major possibilities on what can happen to their money. Specifically, they have to embrace the potential of their assets generating higher returns or the risk of leading them to massive losses.
Factors that affect crypto prices
Aside from knowing what volatility is, it is also important to understand the various factors that help drive a crypto’s price up and down. This way, it will be easier for you to understand whether or not they will work well together with any Bitcasino bonus when you play your favourite games. This way, you will have an idea about whether or not a coin can be valued more or not.
From varying regulations to influential personalities in the industry, here are some of the factors that affect crypto prices:
Node count refers to the number of active wallets for a specific type of cryptocurrency. The stability of these digital assets is directly related to the node count. This means that the more people are using it, the more active users it gets. As a result, the value could increase along with the number of users.
You can determine whether your favourite coin is being sold at a reasonable price by looking at the node count. You can also use this to determine whether an asset has been overbought or oversold.
Investors often review the most recent crypto news to learn about the prices as well as the issues that the industry incurs. Crypto values are prone to being quite volatile, especially if there are issues made against them.
For example, reports that may lead to a bearish price trend, or crypto crashes as some people call it, are cases where they might have been fraud and security breaches. Meanwhile, great reviews as well as positive articles and reports may lead the assets to a strong bullish run.
The price of a cryptocurrency may also be affected by the production costs. The value of the coin will increase as mining becomes more difficult. Aside from the mining difficulty on servers, the production costs are a great contributor to Bitcoin’s high value.
Many countries have started to accept the inclusion of crypto in their economic operations. Some people think that this may have been influenced by how some reputable global companies have started to consider these digital assets as legal tender.
Before crypto was a worldwide phenomenon, several countries were reluctant about it. Some even had restrictions on its usage before it was widely accepted. More often than not, countries that were like that just opened their doors to Bitcoin (BTC) and not to the other coins. Now, several countries are starting to accept it, even if it is not entirely.
When new laws, whether positive or negative, are implemented regarding its use, the prices are more likely to fluctuate. For example, reports about a certain country accepting it as a legal tender will drive the prices up. Similarly, prices are expected to drop when another country decides to ban its use.
Law of demand and supply
In a technical sense, people do not purchase anything they do not find useful. When people perceive crypto to be beneficial in the market, demand for that currency increases. Another element that contributes to a cryptocurrency’s value increase is the likelihood that the government will accept it.
Applying the principles of supply and demand, more people will be motivated to sell a certain variety of crypto once they learn that there is a greater demand for it. Since there is a finite amount of cryptocurrency available, the demand for it constantly grows. This factor raises the cost of cryptocurrencies.
Large crypto holders
Elon Musk, a multibillionaire, is the ideal illustration of how a powerful individual may bring about significant changes in the market.
With Elon Musk regularly posting about Dogecoin (DOGE) on his Twitter account, the meme coin grew to be one of the fastest-growing crypto. It also propelled a lot of people to invest in it and a lot of brands to accept it into their accepted crypto roster as well.
At the same time while he was promoting DOGE, Musk’s vocal expression of displeasure against Bitcoin’s mining processes led to a massive crypto crash. This event did not just affect BTC but other coins as well.
Another factor that influences volatility is how people think of the asset’s longevity. People who take this into account tend to be picky about whether their possessions can be traded in or sold for a fair price if they can keep them. This factor is sometimes dependent on a person’s investments.
Popular crypto you can invest on
Now that you know more about the factors that help determine crypto prices, here are some volatile crypto assets which you may want to consider investing in:
- Bitcoin (BTC) → The highest valued crypto also happens to be the most volatile asset. By existing in the market for several years, the coin has managed to be in an overall uptrend movement despite suffering from crashes every now and then. Though it may be risky to invest in it, the coin remains unbeaten in being the top crypto asset.
- Ethereum (ETH) → The second-most valuable cryptocurrency can be perhaps considered as the most volatile altcoin. Just like BTC, it also maintained an overall upward price trend. One of the impressive characteristics of this coin is the resilience that proved how it withstood the most volatile price dips and managed to recover with all-time high records afterwards.
- Ripple (XRP) → This can be considered a highly volatile cheap crypto that can be traded. There are several key factors that make it impressive. Among which is its overall crypto market performance that shows that its price rises when the market rallies and dips when it crashes. The coin’s special features also give it a strong chance to catapult in terms of value in the years to come.
- Dogecoin (DOGE) → The world’s biggest meme coin also happens to be the most volatile crypto with a large community backing. Like all other meme currencies, DOGE gains a significant portion of its value via market hype, price pumps, and promotion by well-known cryptocurrency influencers and investors.
Common questions about crypto volatility
Still got questions about crypto volatility? Here are some quick answers to some of the common concerns about it:
- Is crypto volatility predictable?
It is unpredictable as it is derived from a study of prices incurred over a specific time period. Still, you may want to observe price trend graphs to have an idea about how future price trends will work.
- Are all cryptocurrencies volatile?
Not all crypto assets are volatile. Stablecoins, for example, have their values pegged to the US dollar. Though their values may also change every once in a while, their prices fall within the same range Therefore, it is safe to say that they aren’t as volatile compared to other cryptocurrencies.
- Why is it important to understand?
It’s because it’s one of the key elements in determining investment risk. Knowing it will help you accept high levels of risk that concern losses and potential gains. This will also determine whether or not you should diversify your investments.
- Is it a good thing or a bad thing?
It depends on how you perceive it. Some people view volatility as a positive thing since it allows them to invest while prices are slightly declining. Still, some may see it negatively as it can result in an immediate loss.
By understanding volatility and understanding what it is, you will see why it’s a normal factor to consider in the crypto industry. Therefore, you will find it easier to accept the risks and the potential of digital assets as you keep in mind that their respective values aren’t always the same. Knowing it will also brace you from price changes that are bound to happen every now and then.