Analysing the Volatility in Crypto Market


Reason for Volatility of Cryptocurrencies

  • Still a New Market 
  • Completely Digital Market
  • Technology Implemented is Still in Development Stage
  • Speculation
  • Media
  • Profile of Investor

The cryptocurrency market has always been very volatile, but the last few years it has been very turbulent, some investors have gained millions of dollars and some have lost millions. 

Volatility is a feature of the crypto market, because of the outsized returns offered and it also highlights the relatively unique freedom of the market. Crypto markets are volatile because there is no central authority to regulate them, thus providing a clear picture of what a pure market should look like.

Reason for Volatility of Cryptocurrencies

Still a New Market 

Despite the huge popularity and attention that the crypto market has received over the years, it is still very small in comparison to fiat currency and gold. At its peak, the cryptocurrency market was around $2 trillion in comparison to the $7.9 trillion gold market and $28 trillion US stock market. 

Completely Digital Market

Most of the cryptocurrencies, including Bitcoin, are completely digital assets and have no tangible backing, such as currency and commodity. The prices of these digital assets are completely based on their demand and supply. Since the supply of many cryptocurrencies, like Bitcoin, is fixed, the prices are determined based on the interest shown by people in buying cryptocurrency.

Technology Implemented is Still in Development Stage

For over a decade, when the first cryptography-based decentralized currency was published in Bitcoin Whitepaper, cryptocurrency technologies like blockchain and many others were still in their initial stages. Nevertheless, many businesses have recognized the potential of blockchain and have started utilizing it for advertising and marketing.

When there are instances, where the technology is not able to achieve its set goal in the given time frame, crypto prices fall. But when there is a breakthrough in technology, like the Bitcoin lightning network, the prices will rise.


Speculation is another reason for the volatility of the crypto market. Investors are making speculations about the prices of cryptocurrency, and based on these speculations they are buying and selling their digital assets. It is these speculation bets that increase the volatility of an already volatile market.        


For speculators and investors the media acts as a primary source of gathering information. They are always scanning the headlines to uncover the next big story that will make or break the market. Based on the media reports, investors make decisions on whether to buy or sell cryptocurrency. 

Profile of Investor

Unlike with other markets, where a person has to fulfill a lot of requirements before trading,  in the crypto market anyone with a few bucks and access to the internet can start trading. This feature of the crypto market has attracted millions of investors all around the world. 

Many people still believe it to be too risky and are afraid to invest in the crypto market. All these factors often congregate and drive the crypto market prices in any direction at any point.    

Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.

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