Sirwin
Sirwin

Cryptocurrency might NEVER be ‘Stable’

By Dzoelx | Cryptocurrency Scripts | 17 Apr 2024


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You saw bitcoin go from $69,528 to $62,973 within 48 hours, right? You probably didn’t have your eyes glued to the charts so much to notice that. Anyways, it happens so frequently that you already lost count of how many times you experienced such a (surprising) move. A rather odd event is how the rest of the market moves in the same direction, immediately!

Many arguments arise as to whether the whole cryptocurrency market is a mere simulation. Thousands of assets moving in the same direction at different speeds but taking off at the same time. Cryptocurrencies’ volatility is a quite interesting case study. While many frown at it, mainly due to its unpredictability, others have found a way to live with it. Those who are yet to come to terms with the intermittent variation in the price of cryptocurrencies only hope that sooner or later, the price gets ‘stable’.

Like USDT? Well, not sure if that will be appreciated. But investors complaining about cryptocurrencies’ volatility are in fact referring to the vicious downtrends. Every cryptocurrency investor wants the chart to stay green and never red; at least, until they get to their target and sell-off. Nevertheless; dips are inevitable, regardless. The chart goes red whenever a holder decides to exit the market, partially or completely.

The extent of the dip depends on how many people exiting the market and how much control they have over the distribution. The main reason why whale movements are studied and dreaded. A whale exiting the market could shake it badly, the market could ‘tank’ depending on the whale’s holdings.

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These abrupt reactions are considered a show of poor liquidity. Poor liquidity, is that even a thing? Poor liquidity is blamed for cryptocurrency’s volatility, but this is in fact, not always the case. Volatility is most times due to traders’ behavior. It’s justifiable, these actions. Cryptocurrency despite reaching convincing levels in efficiency and adoption is still an emerging system. While many enthusiasts have tuned evangelists, there are still few staunch believers who sincerely hold on to their investments during turbulent times. Most traders and holders react to every development and this results in the volatility which characterizes cryptocurrency.

Stability in the crypto mindset will depend on sufficient liquidity, this, in turn, depends on the trader/investors’ behavior, their predilection to hold on to the buy orders, and liquidity supplied on DEXes. This won’t happen easily; it might never happen.

Investors are in constant speculation and have little or no strong conviction guiding their moves. The fluctuations we term volatility are in fact a plain show of trader’s behavior. A majority of altcoin traders’ biggest metrics are Bitcoin’s moves. “Sell when bitcoin dips” that’s the strategy!
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The influence of traders’ behavior on volatility is evidenced by the fact that more established assets are notably less volatile than others of lesser relevance. These unprecedented moves are minimized as holders and traders get more convinced about the quality and viability of the asset they are invested in. Even when that happens, crypto assets are still relatively ‘volatile’. Proper stability ‘might’ never be realized.

Investors who have adopted competent strategies to manage these fluctuations are the only winners in this case; probably the only winners that will ever emerge as this trend doesn’t have a foreseeable end.

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Dzoelx
Dzoelx

Drinking coffee and writing about cryptocurrency.


Cryptocurrency Scripts
Cryptocurrency Scripts

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