Market volatility in crypto refers to the degree of fluctuation or variation in the price of cryptocurrencies over a given period of time.
This can be caused by a number of factors, including changes in supply and demand, news and events affecting the overall market sentiment, changes in regulatory policies, and technological advancements or innovations. Due to the relatively new and unregulated nature of the crypto market, it is often characterized by high levels of volatility, which can pose both risks and opportunities for investors and traders alike. It is important to note that market volatility can occur in both upward and downward directions, and investors should be prepared to manage their risk accordingly.
Example of market volatility
Let's say that the price of Bitcoin is currently trading at $60,000 per coin. Due to some negative news in the market, such as a regulatory crackdown or a security breach at a major crypto exchange, investors start to panic and sell off their Bitcoin holdings.
As a result, the demand for Bitcoin decreases and the price begins to drop rapidly. Within a matter of hours, the price of Bitcoin drops from $60,000 to $50,000, representing a 16.7% decrease in value.
This sudden and drastic change in price is an example of market volatility in the crypto space.
Which cryptocurrency is not volatile
There is no cryptocurrency that is completely free from volatility. However, stablecoins such as Tether (USDT), USD Coin (USDC), and Dai (DAI) are designed to maintain a stable value relative to a specific asset, such as the US dollar, and therefore tend to experience less volatility compared to other cryptocurrencies.