Bitcoin is the poster child of the crypto market. As the coin that started it all, many people attribute their immense wealth to Bitcoin and its sudden boom. But other than being the most valuable crypto in the market, Bitcoin is also the perfect example of just how volatile the market can be.
Take the small timeline of the past seven to eight months as an example. In December of 2020, Bitcoin’s value was sitting at $20,000. As the New Year rolled in, Bitcoin managed to exceed $40,000 and continued to grow until April of 2021. By April the price skyrocketed to $65,000, which was its all-time peak. But only a month later, and the coin fell through the ceiling and landed on a price of $30,000. It stayed in that ballpark until July, where it managed to pick up steam and rise to $45,000 and exceed it.
In just a matter of a few months, the prices for Bitcoin managed to skyrocket to new highs, fall to new lows and then find itself somewhere in the middle. It is important to understand that while the past few months have been especially wild, the market has always been volatile. Now you may be wondering, why is it like that? And the answer to that is not as simple as most people would like.
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The first major reason why it is so volatile is that crypto is still an emerging market. To say that this market is new would be an understatement. Starting back in only 2009, it is only a little over a decade old. With so little time under the sun, it can be hard to track down what makes it tick. Of course, this flows perfectly into the second reason it is so volatile.
Not a lot of people know how crypto, as a system or as a market, works. Given its relatively young age, people have only scratched the surface of what crypto is or can be. More importantly, with not enough knowledge about the system, it can be harder to regulate it. Therefore, the market can get away with something like the price falling by half.
Another important factor that dictates this sort of volatility is expectations. Seeing the different stories of people becoming millionaires overnight, everyone wants to do that; without necessarily understanding what “that” is. Worse of all, these new investors don’t think they need much experience to trade in the market, which leads to them making poor decisions. These newer investors are also the ones that often fall for scams like pump-and-dump schemes.
And these are just some of the reasons why the market is so volatile. However, it helps to learn about what you are getting into before you get into it.