Volatility

Volatility indicates the extent and rapidity with which an asset, such as a cryptocurrency, changes its price over time. To state simply, when a coin’s price undergoes sharp movements up and down during short intervals, it is considered to be a highly volatile one. On the contrary, if the price fluctuations are confined within a narrow range, the markets are said to be exhibiting low volatility.

In the digital currency markets, volatility is a characteristic that one can hardly miss. The prices of cryptocurrencies like Bitcoin or Ethereum can see a difference of hundreds of dollars in a single day or even in hours. The reason for such wild price swings is that the market is still at its infancy stage, trading volumes are much less compared to traditional finance, and investors quickly change their minds based on news, regulations, or global happenings.

Risk is one side of the coin that comes with volatility; however, on the other side of the coin, opportunity awaits. Often, the traders will get their hands on the loss and gain by selling in a rising market and buying in a falling one. Nevertheless, for the patience-reward seekers, it will be a tough time as volatility causes continuous disturbances in the value of their portfolios making them wonder about the real value.

There are several factors behind the crypto volatility that include speculation, small liquidity, market manipulation, and panic buying/selling. Some experts predict using the factors mentioned above and the growth of the market that the volatility will be less in the future when the acceptance is more and regulations are better. However, for now, it is still the cryptocurrency market’s challenge as well as its attraction, a sign of its rapid evolution and youth.