Why is Crypto So Volatile?

Crypto has proven to be a good investment option while, at the same time, the riskiest. It is connected with the high volatility of the crypto market. That is why along with many people that succeed and make a fortune from crypto trading, there are many that lost everything in this field. 

To succeed in crypto trading, it is important to analyze assets and understand what factors affect their volatility. In this article, we will list the most volatile cryptocurrency assets and explain the factors of crypto volatility.

What are the Most Volatile Coins, and Why Is It a Good Idea to Trade Them?

Successful investors are those who diversify their portfolios, adding both large and small-cap coins. Large-cap assets are more resistant to market movements, so they do not change prices dramatically fast. Small-cap coins are usually those in the early stage of development. They are generally susceptible to market trends and have more chances to skyrocket when the market is moving up. Experts recommend adding both large-cap assets such as BTC, ETH, and XRP and low-cap coins (OpenDAO, MultiversX) in small portions. One of them will definitely boost in the future, bringing you a fortune.

How to Analyze an Asset?

Volatile crypto assets are the best investment options because they can grow quickly. Traders research the following aspects:

  • Crypto chart: finding historical indicators and patterns. Charts allow seeing rapid price growth and drops in certain periods of time.
  • News background. For example, a popular coin, XRP, has a big market capitalization and low volatility. Still, when it resolves its troubles with the SEC, its rate will drastically rise, bringing a fortune to coin holders. Ripple current price is $0.34.
  • Technology underlying the project. The more valuable the asset, the more chances it has for future growth.

Why is Crypto Volatile?

The main reason for volatility cryptocurrency is the fact the market is still emerging and gaining popularity. It is the reason why we observe drastic drops and rises in crypto. Another reason is the independence of the government and banks. Crypto rates follow the supply-demand balance. Speculation in the crypto market also takes place, for example, when large investors sell out all their coins, thus,m shaking the whole market. 

One more reason for crypto volatility is fragile investors’ moods – they are often guided by hope and greed, and when something goes wrong, they get frustrated and impatient, taking their finds out of the market.

Read more about crypto investments on the WhiteBIT blog.

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