One of the primary concerns of any investor when it comes to cryptocurrency is the volatility and vulnerability of the crypto market. There has been a constant rise in the number of investors in the crypto market. Although there are several cryptos in the market, Bitcoin has remained a popular choice amongst Web investors. As reported, till July 2022, there were around 20,268 cryptocurrencies in existence, but not all of them are active or valuable. Amongst all these, Bitcoin continues to be a popular choice.
If you are also a new investor and or planning to invest in bitcoin, one of the key apprehensions that surround your mind would be the volatility and how you can combat it. The focus of this article is to highlight the key factors contributing to the price volatility of the crypto market and tips that will help you overcome the same. Read on to know more in detail to have an overall better understanding!
Understanding the volatility factors is important before investing. The next segment of this blog highlights the same.
Table of Contents
1. Market news-
This dramatically impacts the value of cryptocurrency. We had seen this example in the case of Dodge coin and bitcoin. The price romantically fluctuated after Elon musk announced cryptocurrencies. The same trend can be observed in the future as well. Hence if you want to become a pro-crypto trader, you must keep a close check on the market news and developments taking place in this domain.
2. Lack of regulation-
We know that the crypto market is highly unregulated. There is no governing authority or system in place. The interaction is directly between the two users, and the identity of these users remains anonymous. It is because of this reason that the value of cryptocurrency dramatically fluctuates. Hence, if you are planning to make a cryptocurrency investment, you must embrace this fact and get to know how the market operates. Only when you gain complete confidence in how to put currency work should you get into this market.
3. Limited supply-
Yet another important factor that has the potential to impact the value of cryptocurrency is the limited supply of these coins. Since these are a limited number and or not under any control or jurisdiction, there is a greater probability of price fluctuation in the crypto market. The economic principle of demand and supply also influences cryptocurrencies’ value.
4. New asset in the market-
Any new concept that enters the market suffers its own share of growing pain. Being a recent technology and a new concept, it still needs time to get absorbed into the market. It will take time for bitcoin to become a part of the mainstream economy, but the stone for the same has already been laid. Countries like Australia, Canada, El Salvador, UK have to recognize bitcoin as a legal currency. In Australia, USA and Canada, this is considered a commodity and falls under the taxation system.
The surge of crypto exchange platforms- the rise in the number of the crypto exchange platform is also a potential cause for the change in the value of cryptocurrency. Since the transaction value and withdrawal value may vary from one platform to another, it may eventually impact the user’s inclination toward the cryptocurrency. Hence before investing, you should closely look at the clauses and policies of the crypto exchange platform.
When it comes to trading cryptocurrencies is a popular app for trading in cryptocurrencies. You can explore several cryptocurrencies on this platform. There are other platforms that you can explore but before that, make sure that you run through the different clauses in conditions with them. Knowing how the market operates and what are the factors that can influence its value will help you strategize aptly. Hence if you are planning to invest in it, you can run through these points and then make a decision.
The future belongs to cryptocurrency and decentralize finance. Hence if you still haven’t given thought and contemplated your investment decisions, it is the right time to rethink. Work on your crypto trading strategies and define the best assets for your investment profile. Don’t think much and start investing in cryptocurrencies today.