What is the cause of instability in the crypto world?

Unpacking the Causes of Crypto World Instability

 

While the crypto world is still in its infancy, there have been some companies and products that have gained an astronomical amount of value in an incredibly short period of time.

 When you see these coins gain 1000% or more over the course of just a few weeks, it’s natural to wonder why these sudden surges are happening. If you’re interested in better understanding what’s causing this instability, keep reading to find out!

 

Hyper price fluctuations

 

One of Bitcoin’s most appealing features is its decentralized nature; by avoiding banks and payment processors, Bitcoin developed a unique market. But those same factors have created instability in price—when demand surges, supply can’t keep up.

That leads to hyperinflation where money buys less and less every day. The last time it happened was in 2010 when a bug in Bitcoin’s code halved its value overnight. People lost millions as a result—but more importantly, few people trust it anymore as a result.

 

Market manipulation

 

Everyone’s heard about it, but how does it work? It’s not too complicated: Someone with a lot of cryptocurrencies decides to move it all at once in an effort to cause a drastic price change.

 For example, let’s say Jane has $1 million worth of Bitcoin. Instead of selling her coins all at once, she sells them one by one over a period that can last anywhere from hours to years.

By selling small portions slowly instead of holding on and watching them rise in value, she hopes to destabilize prices and make a profit when they recover—hence manipulation. (Some investors argue that traders like Jane contribute significantly to market volatility).

 When market prices are high and rising, manipulation is less likely than when prices are low and falling, according to a 1999 SEC report on pump-and-dump schemes. This is because price volatility creates an aura of impropriety that discourages sophisticated investors from participating.

 

Volatility as an opportunity

 

Bitcoin's meteoric rise (and fall) has been a huge topic of conversation for crypto enthusiasts everywhere. It seems as though everyone is looking to buy or sell their digital tokens at just the right time—if only they knew when that was.

 But what if we told you it was entirely possible to take advantage of volatile markets? Here are three ways to build financial stability in an unstable marketplace:

1. Invest a small amount regularly

 2. Incorporate long-term investment

3. Adopt a long-term mindset This post originally appeared on CoinCentral, where we devote thousands of... The Value of Fintech Blockchain Technologies Are Changing The Financial Industry - December 27, 2017 Bitcoin is slowly but surely disrupting everything around us.

 From finance to music, nothing can escape its reach and influence any longer. And now we’re about to see how disruptive bitcoin and other cryptocurrencies will be to our shopping habits as well.

 

Lack of regulations

 

The decentralized nature of cryptocurrencies means that governments are wary about adopting them. Without any regulation, these currencies could be susceptible to hyperinflation and cyberattacks; for example, an attack on Bitcoin’s blockchain could leave customers unable to access their funds.

That’s not a people are willing to take in such uncertain times, so without any support from regulators, investors have stayed away. That might change as governments become more open to them—though there will always be some lingering concern—it doesn’t look like that’s going to happen anytime soon.

For now, we can only speculate as to when regulation might occur, but it certainly won’t happen overnight or even over a few years. It could take decades before crypto is widely accepted. So,

what does that mean for those who want to invest?

Well, if you don’t want to wait around forever (and let’s face it: most of us don’t), then you should probably stick with traditional investments until crypto becomes more stable.

 

Lack of security measures

 

Cryptocurrencies are under constant threat by hacking or insider attacks. We’ve seen it with bitcoin: When Japan-based exchange Mt.

 Gox was breached in 2014, it lost $450 million worth of bitcoin to hackers—an amount that was almost 6 percent of all bitcoins in circulation at that time. Its failure put users’ trust at and threatened to slow adoption by businesses.

And just a few weeks ago, Bithumb—the world’s second-largest exchange—was hacked, causing more than $31 million in cryptocurrency to be stolen from its users.

 The platform has since halted trading and its future is now uncertain as it reportedly investigates how some customer accounts were compromised. If exchanges can’t guarantee their own security, how can they expect others to trust them?

 

Weak market players

 

One of the biggest contributors to market instability is weak market players. A weak player in a currency’s marketplace is any trader who doesn’t have a strong belief in that currency’s value.

 In other words, when a trader hasn’t done their research on specific crypto and is just going off hype and speculation alone, they are not only more prone to volatility but also are at high for suffering serious losses as well.

 In fact, it could be said that many traders who believe they have done enough research on specific crypto tend to instead put blind faith in their analysis instead. Even worse, some traders don’t actually do any research at all before investing or trading!

Conclusion

The main cause of crypto instability is that people are uncertain about it.

Certain stakeholders (investors, investors, regulators, and governments) have yet to be convinced that cryptocurrencies should play a part in their future.

 Until they are convinced, they won’t jump on board; until they jump on board, volatility will remain high; until volatility remains high, uncertainty will remain high—and so on and so forth.

 The challenge for investors is knowing how to measure each individual cryptocurrency against others. They’re different in every way possible: structure, team size and composition, leadership quality and experience level, stability, etc.

 So which one is right for me? It depends on your appetite, but also on your goal. If you want to make money quickly, then short-term trading may be best for you. If you want to see long-term growth and become an integral part of shaping a new industry, then long-term investing may be more up your alley.

 Either way, remember that no matter what you do or don’t invest in today, tomorrow there will always be something new coming down the pipeline...so keep an eye out!