3 Reasons Why Some Cryptocurrencies Are So Volatile

3 Reasons Why Some Cryptocurrencies Are So Volatile

Ever since cryptocurrencies appeared in the market, they managed to make a huge boom and grab all the attention. Ever since their presentation to the world, which happened in 2009 with the first Bitcoin, until today, we can safely conclude that their history has been turbulent. Why is that? Because with each passing day, they changed drastically. New currencies appeared every day, some of which managed to survive on the market and some of which suddenly disappeared without any reason.

However, what many did not expect to happen is precisely the fluctuation in the value of certain cryptocurrencies. For those who believed in these virtual coins, however, this was not a piece of huge news, because they had great faith in them and believed that cryptocurrencies would change the world and that they were the future. But what many didn’t expect was that they have the characteristic of varying drastically in value, and often for the worse.

Miners and traders of the virtual money market were not clear about the reasons for this phenomenon, how a virtual coin can vary so much and what are the reasons why this happens. We were tasked with doing a little research on this topic, and we managed to find out the reasons why this is happening in the crypto market, and now we are going to share the results of that research with you. Reasons, why some cryptocurrencies have fluctuated, can be the following:

1. The state of the market

The state of the market
Source: coindesk.com

As with other goods and services that appear on the market, so with cryptocurrencies, what happens in the market would have a huge impact on the price of certain currencies. In the market, the main influencers on the price of currencies would be supply and demand, they are the factor that would decide how the prices of certain coins will move.

The crypto market is highly affected by how many coins are put on offer, i.e. how many are circulating on for trading, and on the other side are traders who are willing to pay a certain price for them. For example, if crypto is set to the limit to about 20 million coins, the closer the interest of investors gets to this amount, the higher its price or value would be. The shares of supply and demand for a particular coin will contribute to the fluctuation of its price going up or down, but it would be very difficult to predict what the situation would be if the limit was reached.

2. Involvement in media

As some people say any kind of marketing is good marketing. News and online portals play a huge role in how the prices of virtual currencies would move. They primarily aim to gather as much information as possible on a topic and present it to the public and readers. But not always this information is correct and verified with evidentiary materials. But any news that would be brought out by the media would have a great contribution to the movement of the value of some coins.

Involvement in media
Source: pcgamer.com

For example, if today a portal publishes news that a certain large company plans to make an investment in the market by buying a coin, this will contribute to an increase in its price on the market. The reverse situation can also occur, the price of a coin would drop drastically if some news came out that a country in the world had banned mining or trading with cryptocurrencies. Such news would shake the market and cause the cryptocurrency in question to fall.

3. State regulations

Although Bitcoin is decentralized, that is, it is not under the influence of banks and they do not have any regulation on cryptocurrencies, this does not mean that it cannot be regulated by some state authorities. Countries in the world and governments that are led can pass certain laws and actions that would have a huge impact on the volatility of coins. One such example can be the following, in 2021 China which was one of the largest Bitcoin miners in the world, the government and authorities made a decision and a law that says that transactions, as well as mining of this coin, will be considered an illegal action. This decision of the government of China contributed to an incredible drop in the value of this currency.

In some countries, it has been decided by the authorities that if you mine Bitcoin you are obliged to declare this as income to the revenue agency and you must do it on the same day as the price of the coin at the given time. Such state regulations and decisions by governments can have a huge impact on how crypto market prices fluctuate. In most cases, the regulations have a negative outcome, that is, they lead to a drastic drop in the value of some virtual currency.

State regulations
Source: coingeek.com

These are just some of the reasons why cryptocurrencies on the market can fluctuate, of course, there are a number of other reasons, but they have a smaller impact compared to the ones we have shared with you today. If you want to learn as much information as possible about cryptocurrency and follow every step of it, we have the right place to do it. If you head to karriere-einsichten.de, you will manage to find amazing reports and interviews on this topic and you will have the opportunity to discover many important details about the world of cryptocurrencies that will be useful to you later.

How can this information be useful to you? Well, just by keeping a close eye on all the developments in the virtual coin market, you will be able to make decisions much more easily about whether it is worth investing in a coin at that moment, or if you should wait a little longer for the right moment. How would developments in the cryptocurrency market unfold? We cannot be completely sure, because as we mentioned earlier, this market can be quite turbulent and we can see that with each passing day. All that remains is for us to continue researching all the developments on this topic, and wait for the right moment to make the investment of our life.