Is Bitcoin Volatile?
Crypto Volatility in the Free Market
Is Bitcoin volatile, or does it only appear so at cursory glance? The crypto volatility in the free market is worrying for those new to this modern blockchain technology, and the idea of true freedom from regulation. It takes some time to become accustomed to this new sort of responsibility.
Cryptocurrency markets are known for the epic roller-coaster movements; prices soar one minute, and plunge to a low the next. However, this is only when you are pricing it against a fiat currency. So, is bitcoin volatile? The answer is yes and no. It’s the perception of the market that people base their decisions on, and not the reality of the current economic system.
What Makes Bitcoin Volatile?
We might as well ask, “What makes crypto so volatile in general?” Bitcoin’s volatility arises from a combination of several factors, such as availability, greed, speculative trading, and emotional buying and selling. These all contribute to the current market, and drive manic swings in prices.
Bitcoin operates in a decentralised manner, unlike fiat currencies, which are controlled by governments, central banks, and the Federal Reserve. This makes it susceptible to rapid and sometimes unexpected price fluctuations. In other words, it responds to the market.
Why is Cryptocurrency So Volatile?
The volatility of the cryptocurrency market extends beyond just Bitcoin. Some crypto coins are more susceptible than others. Cryptocurrencies are relatively new and many people simply do not understand this new method of value exchange. This exacerbates the instability of the market, and also hinders widespread adoption.
Additionally, the absence of regulatory control is worrying to some investors. Cryptocurrency should not be seen as an investment and here is lies the crux of the challenge. No one should invest in ‘money’. It is to be used daily.
Why Cryptocurrency is Not Regulated?
The most defining characteristic of cryptocurrency is decentralisation, which means it operates outside the influence of traditional regulatory bodies. Some governments are taking steps to impose regulations on cryptocurrency exchanges, and ICOs (Initial Coin Offerings), but at the end of the day, regulation is simply not possible. They can only attempt to control the entry point of the crypto market, but beyond that, it’s all technically encrypted.
True cryptocurrency is encrypted, and therefore one cannot regulate or control it as the traditional markets. It was created to challenge and shake up the totalitarian hold over the world’s economy. While it cannot be directly controlled, it can be manipulated
Is Crypto Controlled by Anyone?
A common misconception is that cryptocurrency is controlled by a single entity or authority. People are so used to the traditional fiat currency market system –– which is all but free — that crypto is a dramatic departure for them. The reality is that the decentralised nature of blockchain technology prevents any single entity from having control over the entire cryptocurrency market.
When developers propose changes to a particular cryptocurrency’s protocol and code, any alterations must be accepted by a consensus of network participants, making tampering almost impossible. This is why cryptocurrencies fork. You cannot change the original code, and it lives on unchanged for as long as people continue to use it.
How Crypto is Manipulated
How is Bitcoin manipulated despite its decentralised nature? Cryptocurrency markets are still prone to manipulation from those with sheer wealth and might. The economy has always been regulated and controlled by the powers that should not be. The truth is that the so-called ‘free market’ is not free at all. With the rise of cryptocurrencies, this has become even more evident
Due to the encrypted code, blockchain technology cannot be altered by those that would seek to control the market. However, it is manipulated by brute force by artificially inflating and deflating prices. With this method, the outcome is less precise and more subjective to how the masses respond to the movements in the market. This is what we call the ‘crypto whales’. They exert considerable influence over the crypto market movements.
What Are Crypto Whales?
Crypto whales are investors (or sometimes simply manipulators) who hold substantial amounts of specific cryptocurrencies. When they buy or sell large amounts of a cryptocurrency, they influence price movements. Crypto whales can single-handedly make or break a market with large trades, and exploit unsuspecting investors.
One technique employed is call the ‘pump and dump’. It is as literal as it sounds. Those with the wealth will pour in a huge amount of capital into a crypto coin, artificially drive up demand and awareness, and then dump it all at a profit, leaving the late comers bankrupt. Never buy anything when the market is taking an upswing. Always wait for the reverse cycle to buy.
Is Crypto a Free Market Economy?
The answer depends on the cryptocurrency in question. Is it even a cryptocurrency or merely blockchain based? These are not interchangeable terms. When we discuss proper cryptocurrency, it is neither prone to inflation nor alteration. It can then be said to be truly a free market economy. If we look at the overall crypto market, then no, it’s not really a free market economy.
A free market economy requires minimal regulation and intervention, and the unrestricted exchange of goods and services. Cryptocurrency embodies these principles, but the market it often resides within does not, and here is where people are confused. Since there is no way to alter and control properly encrypted blockchains, regulation is achieved at the entry and exit point of the market: the cryptocurrency exchanges.
A free market will flourish while it benefits its members, and will cease to exist when the reverse is true. This is in stark contrast to the current economic model that is controlled by the few, and forced upon the masses. When you play in this global economic market, you are at a permanent disadvantage.
The world has been lured into a blatantly false sense of security with endless regulation. It has not been created to protect, but rather to control the market. When you operate purely within the cryptocurrency market, then you have entered a free market economy. It is solely influenced by the overall market’s needs and choices.
