Why Some Cryptocurrencies Are So Volatile?


The Crypto market is worth billions of dollars even if most of the coins are not stable. The coins that are considered stable also have many disadvantages, which were proven in 2022 when the price of some stable coins moved from its all-time value of $1. These currencies were used as a backup system if any went wrong with the initial investments.

But, there are still a lot of investors that believe in crypto and its potential. Many are pulling out and looking for other investments.

Why Some Cryptocurrencies Are So Volatile

Even if you follow expert picks, everything has a certain risk you need to take to make a profit, so it depends on your beliefs.

What Is The True Value?

One of the biggest problems with crypto is that they are not backed by anything like fiat currency backed by the government. This is a big difference considering that everything is based on the public trust and how we see the currency. But, this doesn’t mean that cryptocurrencies don’t drive value from anything; they have other sources.

These sources include competition, availability on exchange platforms, cost of production, and supply and demand. Some of the things mentioned are similar to fiat currency but on a much lower scale. It’s very hard to regulate a new currency that you will be able to pay for stuff or taxes with.

Also Read: What Is Bitcoin And How Does It Work?

Supply and Demand are Crucial

Like anything else in the world, the value is determined by supply and demand. But, cryptos tend to focus more on trading between currencies instead of trading goods. This is the most complex task they need to overcome to become a new digital currency.

Even if we consider BTC a digital currency, only a couple of countries have some type of regulation when it comes to using Bitcoin. When there is a high demand for a certain coin, the price will go up, and when demand is lower than supply, the prices go down.

There are different types of coins, so the way they are supplied depends on the type. For example, Bitcoin is being mined constantly when the supply is filled. When it comes to ETH, there are additional rewards besides mining it, which means the supply isn’t fixed.

Crypto Exchange Platforms

Another big influence on the price has exchange platforms which can be considered banks. They are the ones who determine if a certain small coin will be on the market, which is a huge deal for every new crypto project. When you have that amount of power on the market, you can easily manipulate it and make a lot of money.

Even if they won’t tell the community which coin will be added without them interfering with the price, this is a common thing that some large corporations do. It’s quite easy to inflate a certain coin just before the price drops to zero, and only the people that made the coin gain profits. This is called a rug pull because they hold the coin in their hands.

It’s very important to know the difference between a rug-pull token and a token with a promising future. Most investors stick to BTC and ETH, even if they are not the coins that can make you the most money. A meme coin can help you make profits if you jump on the opportunity at the right time, but everything is a risk.

Also Read: List of Things You Can Buy with Bitcoin

Market Competition

The competition is very tough in the crypto market, and it’s very easy to make a new coin. Because of this, plenty of investors are doing new projects and trying to push their coins to the top, but most of them fail.

They fail because they can’t handle the marketing pressure needed to promote a coin, among other trends. Many influencers are using this opportunity to make their coins and NFTs, which are sold very fast.


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