The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?
Correct me if I am wrong but I believe it is not only the number of trader that makes the market volatile. Yes the number of trader may affect the volatility of the market but I think it depends on the number of factors affecting the market.
Investopedia clearly explained the factors that affect market volatility.
Anyone can click the image for further explanation about the factor that affect the volatility of a market.
Yes this does affect. The volatility of a coin is determined when the price fluctuates a lot. Now why does the price fluctuates? It’s due to the traders only. When traders buy or sell the coin, it lead to the increase and decrease of the price. Now if more number of traders do it simultaneously, then the price can drastically drop in huge scale.
Or the market may rally in a huge scale if the demand outweighs the supply. Wether the price goes up or plummets depends on which outweighs the other one.
Hence number of traders are directly proportionate to the price of the coin and volatility. Hope this helps you OP.
I think it is more proportionate to the liquidity of the coins... since the number of traders does not entirely define the volatility of the market due to the many factors affecting the market volatility.