What do cryptocurrencies have volatile value?

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Multiple aspects fuel the price volatility of digital currencies’ spot prices like BTC and ether. First, there are measurement scales like the volatility index that helps in indicating the rate of fluctuations in cryptocurrency market value.

 Cryptocurrencies have been dramatically volatile. For example, the price of digital coins on 19th May plunged by almost 30% on average. Volatile accounts for profitability in cryptocurrency trading, so check https://bitcoin-motion.cloud/ for knowing more about trading. So you might think why these digital coins are so volatile; let’s look at the number of factors responsible for cryptocurrency is volatile. 

Bad news!

Broadcasts that tend to daunt cryptocurrency enthusiasts comprise regulations released by government authorities regarding digital assets. Besides cryptocurrency regulations, famous personalities like Elon Musk also move the market value of these digital assets. After announcing bitcoin’s rejection as an exchange method in Tesla, we all know its market value has seen a dramatic downfall. Other popular news that slumped the market value of cryptocurrencies in just one day is China announcing a digital currency crackdown. 

Store of value!

The fundamental of bitcoin is much different from the actuality of bitcoin. Currently, cryptocurrencies are only being used to generate income and store value. On the contrary, bitcoin comprises attributes that resemble gold’s most stable investment asset.

 Ether is popular as virtual silver, and BTC is known as virtual gold as their characters are very similar to the corresponding match. But bitcoin or any other cryptocurrency except stable coins barely resembles fiat currencies. Fiat currencies are supposed to have a high inflation rate than other digital currencies as the supply of these fiat currencies is entirely indefinite. Some virtual currencies’ indispensable store of value makes them appropriate only for trading and investing and not as a monetary system. 

Cryptocurrency whales!

Even after being active in the cryptocurrency market space for a very long time, many enthusiasts are unfamiliar with the notion of these whales. Whales generally are gigantic currency holders outstanding in a complete flow of virtual coins. The whales hold thousands to millions of units in their cryptocurrency wallets. So you might wonder how cryptocurrency whales contribute to the volatility of a token. 

Cryptocurrency whales account for the volatility of a token in two possible ways. The first one is by sitting idle and not moving their cryptocurrency holdings. The second one is selling off many units in just one go leading to a price crash. So if bitcoin whales sit idle for a very long time, it accounts for lessening the liquidity of a token and further making the token volatile.

Cryptocurrencies like BTC and ether were last trading at a few dollars, and that is why investors bought thousands and even millions of these virtual coins. Now bitcoin whales have all the power to manipulate this market by selling even a smaller percentage of their entire holding. 

Bitcoin in Developing Country!

Bitcoin has been utterly robust in countries experiencing a tremendous inflation rate through the conventional banking system. Undeniably the rate of price swings in BTC is very high than USD, but when it comes to inflation rate but experiences a much lesser inflation rate. El Salvador now sees bitcoin as a legal tender due to such reasons. South American countries like Argentina have hyperinflation. 

Nayib Bukele also claimed that this adoption would transform the country into a major economy in the forthcoming decade. El Salvador has already started to acquire traction from foreign investors as the country uses geothermal energy for cryptocurrency mining. The utility of geothermal energy in the cryptocurrency has utterly skyrocketed the profitability of mining and has revived the profitability of the mining business. You might wonder how bitcoin’s relation with developing countries accounts for the volatility. 

After adopting bitcoin in El Salvador, the market value of this virtual coin slumped by an exceeding extent. In June, El Salvador decided against adopting this virtual coin and executed all its plans in September 2021. In June 2021, bitcoin was already suffering from a severe market crash, and this announcement of El Salvador decreased the market value of this coin. 

It is everything you should know about cryptocurrency being volatile.       

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