What is volatility?

What is volatility?

One of the main distinguishing features of cryptocurrencies is volatility. A concept tied to the Latin term “volatiles”. It means “fleeting” and “impetuous”. In the world of cryptocurrencies, this is a characteristic of the fluctuations of an asset's exchange rate, the volatility of the price range, and rapid changes in the exchange rate trend in a short period.

Cryptocurrencies are the most volatile asset, largely surpassing assets such as gold, silver, and securities by this indicator.

Several parameters affect the volatility of cryptocurrencies:

• The formation of market maturity, the lack of stable rules that are formed over time and under the influence of long-term and medium-term factors;
• news background from social, financial, and political spheres, which influence cryptocurrencies;
• low demand for assets, insufficient liquidity;
• software or system bugs in cryptocurrency, forks and hard forks, hacking or hacking attacks on assets;
• the presence of large cryptocurrency holders, the presence of whales;
• fraudulent “Pump and Dump” schemes in the market.

The reason for the existence of all these factors is the general immaturity of the cryptocurrency market and the formation of the industry as a full-fledged participant in the financial world.

However, within the crypto market, volatility is not a negative feature. On the contrary – it's the main trump card of cryptocurrencies. Many investors consider cryptocurrencies as promising assets only because of this characteristic. Volatility allows traders to make money, forms the right financial environment for crypto, and acts as a filter for the market, sifting out unpromising projects.