Ever wonder why the crypto-world is so volatile? Why is it this asset class the most volatile in comparison to other liquid assets in the market? We’ve got all the insights for you:
It has Zero Intrinsic Value
There is no buying or selling of products, no earning of revenue or employment of thousands of people. Generally, there is zero return on dividends, and a small amount of the value of the currency goes into evolving. Basically, it’s just hard to value. We don’t know if its overbought or oversold and if the value is good or overpriced. The lack of fundamental knowledge can sink your boat, all you must wait is for the miracle to happen because everything relies on the market sentiment. Last time we checked, miracles are rare as hell!
Lack of Regulation
Yes, cryptocurrency has been a worldwide phenomenon. The government is trying its best to embrace this new form of currency. Regulation will take its time, and because there very limited to no regulation. Market manipulation is easier but makes it a risky adventure not everyone is willing to take. Especially, institutional investors because they are looking for a secure place to put their capital in.
No Long-Term Crypto-Relationships
If you’re interested in investing something that you don’t plan on to take until you retire, you are least bothered with the daily and yearly prices. No one has time for that! It’s just peace for the mind. You’re also not interested in trading it as well. For the most part, cryptocurrencies just can’t be bought for retirement plans, and not accessible to the financial advisors.
What does it tell you? Its only good for the time being, early adopters who are comfortable being a part of the new technology and are willing to learn how to use virtual wallets and web-based trading platforms. Only they can truly reap the benefits of this digital currency.
Crypto is largely a millennial phenomenon, who distrust the government and are keen to adopt new technologies. But, millennials don’t really have a long-term experience in investment. They also have a less disposable income because of poor job economics and little to no time in the workforce. The combination of all these factors has some dire consequences.
An appetite; not an appetite for food silly! An appetite for risks and hoping for a miracle to happen that they’ll be rolling in money! The capital used in investing is often purchased through credit and its literally cash one can’t afford to lose.
Will the Volatility Decrease?
With time, yes! There will be more regulation, a great diversity in the types of investors and a more mature attitude towards the crypto-market. There are even chances of higher value of the cryptocurrency because merchants are finding more accessible ways to accept this digital currency. Good news? The technology behind the transactions will improve as well.
Forever? Not so much.
It appears that it will be something that is going to lurk around in the long-run.