The cryptocurrency market is a fascinating thing. It is one of the most discussed topics today in the finance field. More people are beginning to invest in crypto, and there are even businesses that pay their employees with it.
However, the volatility of the crypto market has caused a variety of opinions about the stability and usefulness of virtual money. Most bad opinions of cryptocurrency stem from misunderstandings about what it is and how it works.
Understanding the Crypto Market
The first thing to understand about cryptocurrency is that it is decentralized, digital money. This means that, unlike fiat currencies, it is not operating through a central authority like a bank. Instead, it operates using a ledger, known as a blockchain, which contains all cryptocurrency transactions.
A blockchain is made up of blocks of information about cryptocurrency transactions. This transaction information is added to the blockchain and then verified by blockchain stakeholders in the community. This information is encrypted and can never be altered without the holder’s authorization. It is a very secure system, which is why the crypto market is safe.
It is a fact that the crypto market is a volatile one. Crypto market volatility represents how much the currency’s price has changed over time. The more dramatic and frequent the changes are, the more volatile the market is. Though volatility seems risky, there is a concept known as healthy volatility in the crypto market. This is one of the most important factors to understand when assessing cryptocurrency investment risk.
In the stock market, high levels of volatility aren’t always welcome. But in the cryptocurrency market, it provides plenty of opportunities for investors to buy and sell and make a profit. Volatility commonly occurs with new developments and speculation about pricing, just as it does in the stock market. The good news is that extreme volatility is not something common at all.
When it does happen, however, it can lead to negative consequences such as uncertainty and monetary loss. This is because cryptocurrency is less liquid than other forms of money. In addition, the crypto market doesn’t have as strong a network of investors and large firms helping it. So, when the market is too volatile, the lack of liquidity causes problems.
One example is the BTC crash and how this currency’s value has dropped sharply in just a few months. As a result, people have frantically tried to trade BTC to USDT, DAI, and other more stable coins in an attempt to salvage their investments.
This happened partly because of projections and speculations from news stories and the worldwide inflation and rising cost of living. When people have less to invest, they don’t usually continue to spend large amounts of money on cryptocurrency.
Though the market can be volatile for some coins like Bitcoin, others, such as USDT, don’t experience as much movement. You can redeem USDT for dollars, which makes it even more stable than usual.
The beauty of the cryptocurrency market is that a wide variety of options are available for investors of all capacities.