Since the last decade, digital currency, or cryptocurrency as it’s more popularly known, has seen an increasing surge in the stock market. With young millionaires making headlines after investing in cryptocurrency in its early stages, more and more people have been attracted to digital currency as an investment. However, the biggest hurdle to each of these potential investors is the volatility of the cryptocurrency market. Cryptocurrency is infamous for being the most unpredictable out of all market investments. While even the roughest stock markets can be predicted to an extent, predicting cryptocurrency is almost next to impossible.
Several factors contribute to the ever-changing state of the cryptocurrency market. It’s a market that’s new, still in development, and a magnet for amateur investors. For a small market like this, it can get very easy to move it or crash it even without investing. It’s vulnerable to manipulation and change. Analyzing a market like this is very hard, but there are various software and applications out there that can help you in doing just that. These applications conduct intensive cryptocurrency market analysis by observing the market continuously and if you click here, you can learn more about these applications and whether you would like to take their help.
If you want to understand the cryptocurrency market and are looking for more data on why the market is so unpredictable, you’ve come to the right place. In this article, we’ll briefly discuss the factors that disturb the cryptocurrency market regularly and why they occur.
Reasons why cryptocurrency is unpredictable.
The cryptocurrency market is vastly different from other investment markets and as such, addressing why cryptocurrency is unpredictable takes someone to think out of the convention.
The reasons for the unpredictability of cryptocurrency are –
Cryptocurrency is entirely digital and has no physical asset.
Unlike the stock market, where you invest in a real product or a company, the cryptocurrency market is entirely digital and online. It’s not backed by any sort of physical venture or asset and is thus not affected by physical factors like currency, shortage of supply, or government limitations. The market is entirely dependent on its supply and demand – how many people are buying the cryptocurrency and how many are selling it. This makes the entire market too dependent on human will. If people start selling a cryptocurrency suddenly for some reason, then the prices of that cryptocurrency will drop drastically. Similarly, if people decide to buy suddenly, it’ll skyrocket the prices of cryptocurrency out of the blue.
Cryptocurrency is still in development.
Many people think that a decade is enough time for a market to be fully developed. This couldn’t be farther from the truth as cryptocurrency is still being updated to date. Many industries are trying to incorporate cryptocurrency in their industry. However, cryptocurrency is prone to setbacks and market downfalls due to technological issues. If these issues are not resolved in a certain time frame, the cryptocurrency market can see a huge plummet in its prices. On the other hand, the converse of this can also destabilize the market. With the addition of new cryptocurrencies with each passing day, more investors are attracted to invest in these new currencies which in turn can increase their value suddenly causing further instability.
Lack of investing control.
In the case of the cryptocurrency market, investors can go absolutely crazy. Since the cryptocurrency market is so unpredictable, it is home to investors that love the spontaneous nature of investing. Investors like these can withdraw their investments when they feel that the market is going down, and invest early when they think it’s going up. However, more often than not these investments are not based on logic but absolute guesswork and it is guesses like these that bring sudden change to the cryptocurrency market. Since cryptocurrency is not owned or controlled by any government, it’s hard to control investors from going overboard in their investments and change the market according to their will. This lack of regulation also prevents institutions and corporate bodies to invest their capital into something that can be so easily manipulated.
Vulnerable in terms of influence and security.
As we type this article, we realize there is a chance that our article can influence the cryptocurrency market – yes, it’s that vulnerable. Media plays a big role in affecting the cryptocurrency market. Investors are often on the lookout for any news that is indicative of where the market will go. For instance, if a media source reports that Bitcoin prices are going to fall (even if it might not be entirely true), investors will flock immediately to sell their bitcoin to avoid losses. This causes bitcoin prices to fall drastically even if it wasn’t supposed to. This is why cryptocurrency can be frustrating to many investors. It’s not good that a market can be easily influenced by a single article from news sources that aren’t even verified.
One more factor that makes cryptocurrency vulnerable is security. Cyber Hackers are always on the lookout for exchanges that are on hold to hack them. This is why many investors choose to either buy or sell cryptocurrency in one single transaction. In a big stock market, this wouldn’t make a dent. However, in a market as small as cryptocurrency, it changes the tide of the market drastically thus increasing the chances of cryptocurrency to skyrocket or plummet randomly making it very unpredictable to invest in.
Cryptocurrency investors aren’t experienced.
You wouldn’t find many veteran and experienced investors in the cryptocurrency market due to its unpredictable nature. Unlike other markets, you don’t need many things to start trading in cryptocurrency markets. That, coupled with the fact that if you invest properly you can win really big in cryptocurrency, attracts the young and inexperienced generation to try their hand at it. As these investors have a severe lack of experience, they often panic and buy or sell cryptocurrency at strange stages making the market rise or crash.
The cryptocurrency market is very irregular and sporadic, and it’s to stay like that for a while until some kind of regulation and limit is introduced. We hope this article provided you insight into the nature of the cryptocurrency market and its cause. If this article helped you, then please do consider following our website for regular updates as it will help us out immensely.