We all know that crypto is exceptionally volatile but many don't know that it is sort of built in. It is easy to understand why the price moves either up or down when a news breaks out or a rumor surfaces. But there is another variety of volatility which manifests itself in the absence of any major news or significant events. When the price of a speculative asset trades in a sideways market for some time, traders become disinterested in the asset and begin to move their capital into other assets, which they consider more interesting and promising at this point. Unsurprisingly, this leads to an inevitable spike in volatility they were so eagerly waiting for. In this manner, the volatility of cryptocurrencies is a self-sustaining process, which is not going anywhere as long as cryptocurrencies remain mostly vehicles for speculation.
The practical consequence is that the longer the price stays at a certain level or trades in a narrow range, the less time remains till the calm is over and the storm begins. This is a somewhat counterintuitive fact but it is real, so you shouldn't fall victim or prey to seemingly stable prices. They won't remain stable for long. Don't get fooled!
Topic: Volatility of crypto is a self-sustaining process (Read 128 times)
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