Creating A Borderless World Through Blockchain
Unless youve been living under a rock, chances are youve heard ofcryptocurrencies. For the uninitiated, it is a type of currency that doesnt require traditional tender like paper bills, yet still allows one to make purchases of goods and services.
With this in mind, one may wonder why not many people have started adopting such a currency for their day-to-day activities. Why havent more vendors accepting this form of currency? And yes, why arent more people investing in these types of currencies?
The simple reason could be itsvolatility. In plain English, volatility is when a medium, such as cryptocurrency, can easily gain or lose its value just like that. One cannot tell if the cryptocurrency theyre holding on to could be worthless within the next five seconds. While this imagery may be a bit exaggerated, it helps drive home the point that cryptocurrency prices tend to be relatively unstable.
Take heart, though, as this volatility is not necessarily a bad thing. Keep in mind that while its value may drop, it can likewise do the oppositeyour cryptocurrency could just make you a millionaire. Holding on to a digital currency and monitoring its movement could just be a godsend. That currency you possess could just be your ticket to the big time.
So, we know that the cryptocurrency market can be volatile and fluctuate as much as a persons blood pressure. But why is this so, you ask? Here are a few key reasons:
What this essentially means is that it has no such thing as a companys net profit, a product, or anything of value attached to it. Hence, its value can easily be swayed by forces that influence whether it becomes a gold mine or as worthless as an empty tin can.
Sure, a lot of governments around the world are trying to clamp down on it. But in the end, no one is actually watching what is going on. Althoughmany countriesare increasing their adoption and regulation of digital currencies, the industry and its regulatory standards are still very much in the inception stage.
Sure, a number ofhedge funds, venture capitalists, and the like are using it. But no large financial institution is really putting their money on it just yet. In short, theyre all in a wait-and-see attitude on what will happen to this new form of currency. Until then, its value will likewise be as volatile as those folks who cant make up their minds about it.
Think about it this way: if there are only 100 tokens in circulation for a cryptocurrency, buying or selling 10 tokens will have a significant impact on the market. However, if there are millions of tokens in circulation, that same 10-token transaction will have less of a market effect. For the most part, cryptocurrencies arent widely-traded yet, making them less liquid and more susceptible to market fluctuations.
While many investors wait for this to happen, the same number of players are left out. It takes a truly brave soul to invest in a currency that could easily lose its value in the blink of an eye. That being the case, theres a reason the saying goes Fortune favors the bold.
It seems that while not many traditional investors have put their confidence and money into crypto, many risk-takers likemillennials have taken the plunge. Unfortunately, many arent exactly taking calculated risks. In fact, some people have simply gotten on the bandwagon because, well, everyone else that wants to be in is doing so. This obviously wont fly in the financial investment community that goes by the so-called calculated risk.
There are still no set standards, no value, and no long-term gains to speak of. Yes, there aresuccess stories. But these are short-lived and tend to happen few and far between. No one really knows what tomorrow, let alone the next five minutes will be for cryptocurrency. Hence, not many people are willing to take the risk with these potentially volatile currencies.
Arguably the most compelling reason why cryptocurrency values tend to fluctuate is that they are driven by a market that itself is swayed bysentiment and perception. As harsh as it is sounds, the reality is stocks, currency, and other securities have no feelings. We figure that this is why its called cold, hard cash. But seriously, you need to think things thru, take calculated risks, and not let yourself fall for buying or selling frenzies. Doing so can easily cause an unstable situation.
And this is what the cryptocurrency market is. Although there are no set values, no regulators, and in the end, no physical gains, its important to understand that the market does attach intrinsic value to digital currencies, though that value is heavily-susceptible to market perception.
Crypto traders need to base decisions on real research, not on hype or a collective/hive mindset. Youre responsible for doing your due diligence if you want to improve your chances of success. Remember that cryptocurrencies are still generally for those withhigher risk appetites, but with more risk comes the potential for more gains.
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Written byNOAHCOIN Team Categorized:cryptocurrency Tagged:cryptocurrency,price analysis