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How Stable Are Cryptocurrencies Actually?

Technological innovations paved the way for the emergence of digital assets that are based on the concept of the blockchain network. Aside from using these cryptocurrencies as a means of payment for purchased goods, several individuals saw its potential as an investment vehicle where they can grow their money. For this reason, more and more people are delving into cryptocurrency trading. But the question remains in terms of the stability of these digital assets.

Cryptocurrencies

Causes of Volatility

The cryptocurrency market is deemed as a volatile market that provides investors and traders with the opportunity to earn a lucrative sum from their investment. To maximize the margin of revenue that they garner through its volatile value, they often leverage on trading platforms. In line with this, a safe, secure, and automated trading is available via Bitcoin Loophole, a platform with an intuitive and user-friendly interface for Bitcoin trading. This is where they can easily buy when the price of the digital asset is low, and sell when its price is high. This varying price of cryptocurrencies can be attributed to two main factors.

Emerging Market

One of the primary reasons why the value of cryptocurrencies is highly volatile is because it is still an emerging market, with a size that is significantly smaller compared to the fiat currency market. Even during its peak, the total market size of cryptocurrencies reached only billions compared to the trillions reached by fiat currencies. This small market size means that even a small force can already have a large effect on its price.

Speculation

Another reason why the value of cryptocurrencies is volatile is because of speculation. The speculation involves the betting of various investors on whether the price of a certain digital asset will go up or down because of the buying or selling that is happening. Aside from this, the media also has a massive impact when it comes to the overall price of cryptocurrencies because speculators are constantly eyeing on the headlines for the next big news that can potentially make or break the market.

Rising Stability

Over recent years, the reduction in the volatility of the cryptocurrency market has been remarkable. This is an indication that the overall market is slowly becoming more stable. Perhaps this can be because of the increased liquidity, as well as the varied global participation of more and more individuals and businesses. The reduction in the volatility can also be because of the regulatory developments, as well as institutional involvement, making the market more efficient. Aside from this, the once emerging market is slowly becoming mature, paving the way for its stability.

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To wrap things up, it can be deemed that cryptocurrency is an emerging market, with the technology behind it still in the development phase. Add to this factor the speculation and media which makes it volatile. Nevertheless, over a recent couple of years, it is noticeable how the stability of these digital assets has slowly risen. This brings forth the opportunity for you to make a long-term investment using this rider, as opposed to the short-term trading.

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