With its increasing popularity, the crypto market has become an attractive investment opportunity for many traders. From Bitcoin to Ethereum and beyond, hundreds of different currencies are now available to buy, trade, and sell. With the emergence of new technology like blockchain and distributed ledger technology, the crypto market is becoming even more sophisticated. Yet, with its growing popularity, it is also a lot volatile.
Cryptocurrency volatility has been a huge talking point since its inception. As the market evolves and matures, understanding the factors that influence crypto volatility is more essential than ever. With its increasing popularity and value, it’s not surprising that people are wondering about its future. In particular, what kind of volatility can we expect from cryptocurrencies in 2023?
Factors Influencing Crypto Volatility
Demand and supply
Crypto volatility is driven by demand and supply. As more people become interested in crypto and buy up coins, the price increases, making it a popular asset for investors looking for quick profits. However, when the demand is not met with an equal increase in the supply of coins from miners or other sources, this can lead to rapid price fluctuations and high levels of volatility.
The availability of cryptocurrency on exchanges is also a significant factor influencing its volatility. If limited amounts are available at any given time, then the prices may be higher due to increased competition between buyers. On the other hand, if there is abundant digital currency available on exchanges, the prices may drop as buyers become less interested in purchasing them. In 2023, we can expect these patterns to continue as crypto becomes more widely accepted and more people start investing in it. One of the suitable ways to understand the crypto market is through apps like crypto trackers.
Another factor influencing crypto volatility is government regulation. Governments have recently become much more involved in cryptocurrencies as they seek to understand and control their movement within their respective countries. Any new regulations or restrictions set by governments could drastically alter cryptocurrency prices and create price swings throughout 2023. Hence, it is best to know the regulations and track them through a crypto tracker before investing.
When the public perception towards cryptos increases, so too do market capitalizations and trading volumes can lead to influential movements in crypto prices across different platforms throughout 2023.
The public sentiment surrounding crypto assets and currencies is seen as one of the main drivers of their volatility. For instance, during the 2017-2018 bull run, the price of many tokens and coins skyrocketed due to overwhelming positive sentiment spurred by mainstream media and new investors entering the market. Similarly, when negative news stories come out, or a hack occurs, it can cause a big price selloff that leads to heightened volatility. Experts believe public sentiment will continue influencing crypto asset prices in 2023 and beyond.
The cryptocurrency market has been highly volatile recently, and analysts are divided into the factors contributing to this volatility. One key factor that is overlooked is the role of media hype in driving crypto market volatility. Media coverage of cryptocurrencies can impact market sentiments, leading to abrupt changes in market prices. It then impacts the prices and market stability causing volatility.