Market Volatility for Cryptocurrencies

The Rise and Fall of cryptocurrency Market Prices; Volatility For Bitcoin

Being in the world of cryptocurrencies is not meant for the fainthearted. This is because digital currencies are highly volatile. They can double or treble within months and sometimes fluctuate adversely within a day. However, among other crypto coins, Bitcoin has proved to be less volatile.

Market volatility has proved an uphill task even to those investors who are experts in crypto trading. It is highly challenging to determine what factor might trigger a rise in the overall value of an individual crypto coin, and in what angle the factor will aggressively affect the cryptocurrency market equilibrium.

However, like any other market situation, it is influenced by the law of demand and supply where a drop in the value of particular coin would be attributed by traders and investors selling off more than they are buying. The converse is true, where if the buying rate is higher than the selloff, then there would be a rise in the value of cryptocurrencies.

You could be wondering what these factors are; they are either internal or external factors. Below, we have broken each of these components to delve into the exact factors influencing market volatility for crypto coins.

Internal Factors

Cryptocurrency traders; In this case, traders are the key influencers of volatility where active traders have little influence on highly capitalised digital coins and vice versa. Cryptocurrency bulls and bears will always try to manage fluctuating BTC prices using appropriate market conditions and tools, such as buying the best Bitcoin wallet.

The lesser or middle-level traders, their action is predominantly dependent on the activities of significant traders to buy or sell of crypto coins. Meaning market volatility will be reduced if the major traders are reluctant to hold off transactions on appropriate prices.

Gross influence of cryptocurrency prices; Each cryptocurrency coin has a relative value to another. For example, the value of altcoins in respect to the amount of Bitcoins will be influenced by an increase in the price of the latter where the altcoin will be pushed to BTC. Simply put, the growth of BTC prices results in a drop in the value of Altcoins.

External Factors

In this case, the volatility of Bitcoins is dependent on the events occurring outside the market itself. These factors include but not limited to;

Acceptance of cryptocurrencies; A rise in recognition of cryptocurrencies results into devaluation of fiat currencies, ultimately causing a surge in the value of specific crypto coins.

Technical updates on cryptocurrency software; This a crucial factor that enhances an increase in the value of cryptocurrencies. For example, the update of Bitcoin SegWit August last year saw the price of Bitcoin double. This runs across all other cryptocurrency coins where an update of their software leads to an increase in the rate of particular crypto coins.

Global Economic News; Any review on cryptocurrencies affects the volatility of the cryptocurrency in question. Positive or negative evaluation and assessment of digital coins by political and authoritative figures in economics heavily aspects the rise or fall in the prices of cryptocurrencies.

The current volatility evidenced by reduced cryptocurrency prices is attributed to South Korean government. Warren Buffet is another business mogul who does not believe in the success of cryptocurrencies. If the assessment or reviews were positive in such a case, then a rise in Bitcoin prices would be evidenced.

Photo via Shutterstock.

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