What Makes The Cryptocurrency Market So Volatile? Find Out

In December 2020, Bitcoin was trading around $20,000 (roughly Rs. 14.85 lakh). In January this year, it crossed $40,000 (roughly Rs. 29.70 lakh). Continuing its bull run, it reached an all-time high of $65,000 (roughly Rs. 48.27 lakh) by April. Then in May, it crashed and throughout June it remained below $30,000 (roughly Rs. 22.28 lakh). The coin began rallying again around July 20 and surpassed $45,000 (roughly Rs. 33.42 lakh) last week for the first time in almost three months. Similarly, most other popular cryptocurrency coins have behaved over the past few months. While this has resulted in a windfall for some, some others may have also lost a part of their investments due to the high volatility in the cryptocurrency market.

The one question most troubling to a majority of investors is: Why is cryptocurrency so volatile? The cryptocurrency market has been volatile from the beginning but the last few months have been particularly a wild ride. There are a few factors that determine the trajectory of this market.

Emerging Market

Cryptocurrency is still an emerging market, gaining rapid popularity as well fuelling quick disenchantment among investors. Despite all the media attention, this market is still minuscule when compared to traditional currencies, or even gold. This means even smaller forces – a group of people holding large amounts of crypto coins – can influence
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