Cryptocurrency is a volatile business.
If you see cryptos as a short-term investment and a fast track to becoming richer, your analysis is wrong.
Last week, cryptocurrencies collapsed. However, Bitcoin gained ground in recent days.
The cryptocurrency business is a roller coaster. It has high peaks and drastic falls.
“Massive retracements are always scary, but seasoned investors tend to see them as buying opportunities,” said Mati Greenspan, portfolio manager and founder of Quantum Economics.
Why is Bitcoin so volatile?
Nathan Reiff says that Bitcoin is volatile because it depends on feelings and projections.
“Bitcoin’s price fluctuates because it is influenced by supply and demand, investor and user sentiments, government regulations, and media hype,” Reiff published.
“All of these factors work together to create price volatility.”
For example:
-China cracked down on banks completing crypto transactions.
-Tesla will not accept more crypto transactions as a form of payment.
-Elon Musk altered the crypto market by tweeting.
These three reasons alter the value of cryptocurrencies and the will of investors.
However, the main clue of volatility relies on its supply and the lack of central bank control.
Crypto developers say the added value of all assets is the lack of control from a central entity. However, it is also a curse.
“No central bank or government can step in to support or prop up markets and artificially subdue volatility,” said former director of research for Fidelity Digital Assets Ria Bhutoria.
“Bitcoin’s volatility is a trade-off for a distortion-free market.“
Another reason why Bitcoin is so volatile relies on its time of existence. Bitcoin has 13 years of life, it is a young asset that needs more analysis time.
“While a company that went public yesterday in an IPO doesn’t have any history, a company can at least be evaluated on its business prospects, earnings, and cash flow,” Peter Boockvar, chief investment officer at Bleakley Advisory Group commented.
[It’s] only 13 years old and thus doesn’t have much of trading history.”
