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.
Speculation - The cryptocurrency market thrives on speculation. Investors bet that the prices would go up or go down to make profits. These speculative bets cause a sudden influx of money or a sudden outgo, leading to high volatility.
Developing Technology - The blockchain or other alternative technologies on which these coins function are still evolving. It has only been a decade since the Bitcoin idea was first proposed.
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 the trade. Even if they sell only Bitcoins, it would be enough to crash the whole market.