Crypto market is always volatile for these reasons

No matter how unbelievable this may sound, the crypto market is still an evolving market. Although having gained massive popularity in recent times, it will be erroneous to think that the market has gained enough traction to compare with traditional currencies, or gold even. Ultimately, this means that just a small group of people holding very large amounts of crypto coins can influence trade, and the direction of the market. That is, should they decide to sell only Bitcoins, that in itself would be enough to crash the entire market.

Speculation Effects

It’s no gainsaying that the crypto market thrives on speculations. When investors make their bold predictions about the future of the prices, they place their bets on their predictions to make profits. Now, these speculations could either result in a sudden inflow of money or a sudden outflow, leading to high volatility.

Inexperienced Investors in the Crypto Market

There’s this uninformed notion that the market doesn’t really require expertise, unlike the real estate or the stock market. Therefore, and for most part, only investors on a get-rich-quick agenda are investing in it. Sadly however, when the planned overnight wealth doesn’t exactly happen like that, then they lose their patience and withdraw from the market again. This unstable fizzling in and out also lead to volatility.

Purely Digital Asset

Being purely digital in nature and with no physical backing by any fiat or physical commodities, most cryptocurrencies, including Bitcoin and Ether, have their prices being determined only by the laws of supply and demand. So in the absence of any other stabilizing factor, like government backing, anything and everything may lead to a fluctuation in demand or supply.