Bitcoin volatility: how much should we worry about?
Why is there so much apprehension surrounding this cryptocurrency? Historically speaking, when Bitcoin was first introduced in the market in 2009, nobody would have imagined the success that it is enjoying today. The truth that prevails today is that Blockchain technology is one of the most sought-after digital assets for many traders and investors. A key factor that becomes apprehensive for the traders is its pricing vulnerability. So the question that arises is, should you not invest in Bitcoin or stock is the only option?Let’s try to unveil the answers for the same.
What is Stock?
When you are investing in the stock of a company, then you are taking ownership of a fractional asset of the business. When you take the legal ownership of stock in the market, then you also get a claim on the asset and reward in the form of cash flow for investing in the stock.
Does that mean that stock is not fluctuating and it is not volatile? The pricing of the stock varies. The pricing of the stock depends on the company’s growth strategy.
In order for your start to be profitable, it is important that you must closely assess the market and the company’s performance before invest.
What is cryptocurrency?
Any asset or cash flow does not back stock market cryptocurrency. It is empowered by peer-to-peerfunctioning. Besides, cryptocurrency also gives you several other advantages like you can do transactions, use smart contracts, develop decentralized applications amongst the many. Except for stable coins, none of the cryptocurrencies is backed by an asset. It runs in a virtual world and has no physical existence.
So why does the price fluctuate? Cryptocurrency is not associated with any cash. The pricing in the cryptocurrency market is solely driven by sentiment. The way people respond today to cryptocurrencies eventually impacts pricing. Thus, making it highly volatile in comparison to the stock and the share market.
Understanding Bitcoin volatility
If you are into active reading on Bitcoin and trading concepts, volatility is one term that you would have come across quite often. So, what does this word mean? What does it mean that Bitcoin is more volatile than any of the stocks? Is it okay to consider Bitcoin as an investment option?
When we say Bitcoin volatility, then it takes into consideration various aspects. For example, China’s announcement on banning Bitcoin impacted its value. Similarly, Tesla’s denouncement of Bitcoin payment acceptance led to the downfall of the price of Bitcoin. Within two weeks of this announcement, when Elon Musk announced his inclination in the crypto market, the price of Bitcoin boosted. Therefore,unlike the conventional trading system in stocks and shares, the pricing of Bitcoin is impacted by even a simple tweet. So, this becomes one of the contributing reasons for the price volatility of Bitcoin and cryptocurrencies.
Demand and supply of Bitcoin also impacts the pricing. The pricing is primarily affected by the number of points that are in circulation in the market and how many people are willing to invest in it. Let’s say, for example, if we talk about Bitcoin, then there are only 21 million coins in the market. The higher the supply gets to this number, the higher the pricing.
Want to be crypto investors: don’t miss the risk factor
While volatility may add to one of the key drawbacks of investing in cryptocurrency, that doesn’t deter the investors from taking the risk. Bitcoin is drawing more attention than ever, and many investors, even the millennials, are jumping into the pool. If you are keen to make a cryptocurrency investment, registering yourself on a reliable crypto exchange platform should be the first move.
Platforms like Bitcoin Era provide a stable and easy to use interface for the traders. So, you can register and start trading.
While much is being talked about the Bitcoin and cryptocurrency market, lack of research and critical assessment back your investment portfolio. Assertive research plays a significant role in defining your future course of action. Make sure that you add 2 to 3 different cryptocurrencies to your investment portfolio. Search for the best options on Bitcoin Era. Allocate the amount accordingly, proving more beneficial than investing the entire amount in only one currency.