Although the cryptocurrency market offers investors great opportunities for profit, it also presents great risks of loss. Cryptocurrencies have become quite popular in recent years. hard ups and downs While it opened the door to wealth for some investors, it led to bankruptcy for some investors.
Although there are also ups and downs in the stock markets, this situation is not as serious as in cryptocurrency exchanges. The main reason behind this situation is inconstancy
So what is this “volatility”?
The term volatility, which means the fluctuation of prices, is the change of prices in the financial markets. degree of uncertainty and variability It is a concept that expresses.
The volatility of an asset or market is the price of that asset or market. How fast and over what range? shows that it has changed.
Cryptocurrency markets In markets with high volatility, prices change quickly and sharply. Rapid price movements and unexpected market conditions can be observed in such markets.
stock market It is a market with lower volatility than the cryptocurrency market. For this reason, more limited price changes are observed and a more predictable environment prevails compared to the cryptocurrency market.
One of the reasons why the cryptocurrency market is volatile is that it is a new market.
First new and immature Being a market, faster price changes can be seen in cryptocurrencies. Because the level of experience in the market is lower than in the stock market.
Moreover, it is a process that takes time for the prices of financial assets to settle and become more stable in all markets. In the investment world price discovery In this process, called cryptocurrencies, it is possible to see volatility in cryptocurrencies until investors agree that cryptocurrencies will be a long-term investment instrument.
The biggest difference between cryptocurrency and stocks: decentralization!
The second reason is that cryptocurrencies are decentralized. Due to their decentralized structure, the cryptocurrency market is as tight as the stock market. not subject to legal regulations. For this reason, a lack of regulation and uncertainty can lead to drastic price changes.
And of course, when it comes to the financial markets, the most fundamental reason: the balance between supply and demand.
First of all, the cryptocurrency market, compared to the stock market smaller Therefore, even a relatively small investment in the market can significantly influence prices.
Moreover, the value of cryptocurrencies is often Because it is based on speculation and market sentiment This causes rapid and unexpected price movements in the market.
As we mentioned earlier, the fact that the market is not yet mature makes it very sensitive to the feelings and thoughts of investors. For this reason, due to the uncertainty that the cryptocurrency market contains, investors’ expectations largely determines prices.
Finally, unlike stock markets, cryptocurrency markets 24/7 transaction options It also allows sudden price changes at any time.
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Source: Web Tekno
Jason Root is a blockchain enthusiast and author at Div Bracket. He provides comprehensive coverage of the latest developments in the world of blockchain, offering readers a unique perspective on the industry and its potential for revolutionizing various industries.