Cryptocurrencies are cooking up an absolute storm all around the world currently. If you’ve been in close observation about the wall street bets incident, you’ll know exactly what we’re talking about. If you haven’t, well, let’s say that a group of members on a Reddit platform decided to manipulate the stock market so well that the stock of a particular company shot up, of the product which was about to be shut down.
If this shows anything, it shows the effect that a small group of people can have on multimillion-dollar companies and the overall effectiveness and volatility of the stock market. Dogecoin, one of 2021’s most popular cryptocurrencies to invest in, really shows the indulgence and power people have over the stock market and the crypto market.
Cryptocurrencies are still new to most people and are increasing exponentially day by day. The emergence of cryptography revolutionized the way we view investments and finance itself. The slow adaptability is understandable as nations don’t want to adopt a currency with no federal body to regulate it.
But the upsides of cryptocurrencies far outweigh the downsides that come with them, which is why countries are on the verge of recognizing bitcoin as a national currency. Visit The NewsSpy to know more about cryptocurrencies and the latest trends that come along with them.
In this article, we’ll cover the basics of bitcoin and other cryptocurrencies and address the volatility of these currencies and what to do while investing in them. With that being said, without any further ado, let’s get in!
What Is Bitcoin?
Let’s start with the basics. The emergence of financial systems all started with paper money and digital payments. The road from barter system days to digital currencies has been a long way, but we’re just getting started. As we know, digital currencies are just paper money that is made into a dematerialized form.
This was, of course, only possible after the invention of modern computers and the emergence of a digital finance ecosystem. In the late 2000s, a person or a group of persons under the pseudo-anonymous name of Satoshi Nakamoto released a paper with details of a financial instrument that worked based on cryptography.
What makes cryptocurrencies so unique and popular is that it works on cryptography principles, which is a technology that ensures complete encryption of data and is accessible only to the sender and receiver of this data. This applies to finances and revolutionized the way we even look at money.
What Is Market Volatility
We have to understand what drives volatility, and at its core level, volatility is driven by market sentiment. That, of course, is what drives the price up and down, and so to understand volatility, we have to understand all the different things that can infect and change market sentiment.
Things like new economic data, innovations from a company, a product release or if you’re in a trading a drug company, new drug release that’s coming out, leadership changes in the company, leadership changes in your government, and herd mentality, which is where people are following the herd right now we’re in a strong bullish market in which we don’t have a lot of traders that are just following the herd.
Political changes, changes in interest rates, the Feds getting involved in, monkeying around currency fluctuations, and on and on. The point being is there’s almost an innumerable amount of elements that can change volatility and market sentiment, and so rather than worry about what we need to instead on how we can react to volatility, how we can control the elements that are within our ability.
Volatility as a term has unfortunately become synonymous with price swings. If you say it’s a volatile market, you’re obviously, or you’re quickly thinking about how far the price may go. Unfortunately, volatility is a study of probability because we’re talking about how likely a particular stock or a specific option fluctuates in price.
When people talk about Bitcoin, the issue of its volatility always comes up. What most people don’t know is that sometimes, volatility isn’t such a bad thing. There have been times where Bitcoin’s price would drop a few thousand dollars in the span of a few hours. At the same time, it could do the total opposite.
You could have Bitcoin at a specific price, and its price could rise exponentially throughout the day. So what makes Bitcoin’s price so volatile? News, the opinion of highly influential people, brands investor FUD, FOMO are some of the many factors.
If you want to learn more about what affects the price of Bitcoin, you can check our video out on the factors that determine the price of bitcoin. We’ll put it in the icon on the top right corner. A lot of problems can come up when the price gets volatile.
First of all, it makes bitcoin trading a lot riskier. After investing in Bitcoin, your decision-making will eventually be affected. When you have a lot of money riding on something so unpredictable, it can mess with your head.
Some people end up panicking and making rash decisions with their investments. Another problem that comes up with Bitcoin’s volatility is the issue of adoption.
Effects Of Volatility
“Volatile” is a harsh word, and it could affect the way the media presents crypto. It could change the general perception of Bitcoin for the worse. As bitcoin enthusiasts, adoption could affect how the general public uses digital currencies. It’ll also change the way it’s recognized and regulated by governments and financial institutions.
We know you’re wondering, “How can volatility even be a good thing?” We know most of us have probably experienced the crippling doubt, fear, anxiety that comes with it and then the FOMO when the price starts going up… And then you start wishing that you bought more Bitcoin when it was much cheaper, and then you start thinking about how much money you could have made, But Bitcoin’s volatility isn’t bad.
There’s nothing quite like the feeling of making a profit from your investment. The thrill of making even the smallest amount of money from Bitcoin is unlike any other. Speaking of profit, Bitcoin’s volatility is one of the reasons day traders can make a significant amount of profit! The wide swings Bitcoin experiences increase the range for potential returns.