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Cryptocurrencies have attained huge fame among crypto traders and investors since the beginning of 2009. These investors have attained fundamental knowledge about the concept as they often tilt their heads or nod without confidence at the term "cryptocurrency". You should know about the production cost of minting crypto and how to store them for their value. Since every day there are thousands of Bitcoins that are harvested, there is a high chance that the demand and the supply of the coins decide whether they will be accepted by the investors or not. Knowing the reasons influencing the market price will aid you in deciding whether to start trading or investing in it or continue to look out for its developments on BitLQ trading platform.
There are various reasons why the prices of cryptos have attained such volatility.
Reasons for Price Fluctuations/Volatility of Cryptos
1. Speculative volatility
Speculations are the major triggers behind the pricing of a cryptocurrency. The smaller market leads to greater room for the lows and highs, leading to the ripple effect, which is larger in terms of the buying or selling orders representing a massive market percentage.
Consider the moment you have a lot of cryptos and sell half of that stash.
Price fluctuations also happen through media reporting. Whenever there is an outburst of negative news, fewer people wish to buy it.
2. Demand and Supply
The demand and the supply would play the most influential role towards the cost of the commodities than any external factors. The market value of the cryptocurrencies is restricted to 21 million coins. When this circulating supply heads closer to the limit, there will be a significant rise in prices. When this circulating supply reaches the limit, it will lead to a rise in prices.
But it is tough and challenging to forecast the values upon reaching the limit as investors can hardly attain much profit through digital mining assets.
3. Factor of Regulation
Regulation fluctuations involve the government's end, which makes things easier as it comes into action while discussing volatility. Whenever there are speculations on whether the tokens are allowed to trade when the market price fluctuates is a point of consideration.
4. Timing Factor
The conventional stock exchanges remain open for some time or hours a day. Alternatively, the market of cryptocurrency is under constant operations. However, it is never a distinctive factor of consideration to affect the coin's value if something takes place over the night affecting the market and the real-time price changes. For instance, if you go through some of the news reports during covid, the price of Bitcoin had a fall. And thereafter it renovated. So the timing should be very sharp when you start the process of investment.
5. Actions of the investors
There is a significant rise in the demand for cryptocurrencies during their restricted supply. The long-term and wealthier investors are holding the cryptos to prevent these assets from attaining greater exposure. Consequently, the price volatility is affected by the investors.
6. Mass Acquisition
The price movement of the crypto would increase through the major acquisition it notices in this market, driven by the thought that the greater demand for the product would result in its price increase. It is the one description that has become the major reason behind the rise of the prices of cryptos and an answer to its volatility.
7. Still in its infancy
Gold has been used as a mode of exchange for a longer time. Consequently, in terms of supply, price, and demand, they are considered stable commodities. Identically, the fiat currencies have worked around for quite a few years. Since there are more than almost 13 thousand types of crypto that are available, you should be careful about selecting the right one as there is a stiff competition. There is also the policy of internal governance that is necessary to allow a steady growth of crypto.
Conclusion
Due to the unpredicted future, people are often driven backfoot in terms of cryptocurrencies. But, it is highly misunderstood and still in its infancy. It has given base to several speculations on the stocks of an online company leading to its market volatility. Time would show whatever is there in the store for the cryptos market. But, the experts are right as we are subjected to the next important crypto insurgence.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.