In the series "The 10 Biggest Myths About Cryptocurrencies", we'd like to take a closer look at the 10 most widely used claims about cryptocurrencies and their opportunities and risks. In doing so, we will daily explore a new myth and check it for accuracy.
The volatility of cryptocurrencies makes investments unattractive
One of the arguments that is often pleaded against investing in cryptocurrency is: "There are so many price fluctuations and nobody knows what it looks like tomorrow, in a week, or in a month. Let's get away with it. "But are the price developments on the crypto market really a reason to opt against crypto investments? Let's take a closer look at the situation.
In fact, the high volatility in the markets is currently undeniable. The total market capitalization of all cryptocurrencies has increased fifteenfold since the beginning of this year alone - an increase of 1400%. If you look at Bitcoin as a crypto-pioneer, you still have an increase in value of more than 6,000 euros when, starting from a market value of about 800 euros in January of this year, it has risen to a provisional all-time high of 7,000 euros.
These absolute numbers do not speak a clear language. So you can not imagine the price increase of Bitcoin and other cryptocurrencies as a linear straight line, which begins at a certain starting point and then shows continuously upward. Rather, volatility means a constant ups and downs, including periods of stagnation. Critics might think that these uncertainties make crypto-investments difficult, because you never know what time is best for getting started or when you should probably wait for a course correction.
High volatility can also bring benefits for investors. Especially day traders, who are always ready to buy and sell their coins, can make quick profits through high fluctuations. In addition, larger fluctuations are almost always associated with external events such as regulatory measures or a pending technical innovation. Anyone who is always informed and in the picture, so here is clearly in the advantage and can classify the volatility better.
In addition, it is not set in stone that this high volatility will continue in the future. The crypto market is currently still relatively low capitalized and vulnerable to sudden changes in direction, despite the radical increase. There is reason to believe that volatility will normalize with higher market capitalization and eventually return to the 2015 and 2016 levels - during those years Bitcoin had lower volatility than crude oil and natural gas.
To summarize, although the problem of volatility is real, it may not necessarily be a problem on closer inspection. Fluctuations can also benefit the investor, and they will become smaller as the cryptocurrency continues. And despite all the fluctuations, Bitcoin and Co. have always set a new record high after every nosedive. Long-term development is pointing upwards, which could also provide security for long-term or risk-averse investors.
more volatility, more opportunities !