Volatility of the Cryptocurrency Market
6 Jul 2018
No More Insecurity with Volatility
By: Jason Whang
$20,000. In December of 2017, it seemed as though the price of Bitcoin could only increase as it reached a price high of $19,783.06 according to Coindesk’s Bitcoin Price Index. However, on June 26th, 2018, Bitcoin’s price dropped to $6,074.92 and even dipped below $6,000 twice that month. This extreme volatility has discouraged the timid from investing in cryptocurrency. Yet, others have kept their faith in the future of a decentralized, secure, and efficacious currency that may be adopted worldwide and yield exponential gains. These disparate outlooks beg the question: Why are cryptocurrencies so volatile? And what can be done to mitigate this?
Since cryptocurrencies and blockchain-related technology are emerging technologies that can potentially revolutionize the world as the “next Internet,” their prices are heavily influenced by the media. Any form of negative press, whether warranted or not, can instigate a public panic and a drop in the price of cryptocurrencies. In tandem, any form of positive press can bolster greater investment and a rise in price.
This volatility further exasperates the division between the timid and the hopeful. The timid may become more distrustful of cryptocurrency’s claims as a store of value or an asset that does not greatly depreciate long term, while the hopeful, especially in developing nations where currency inflation drains the economy, more widely adopt it. These bipolar actions can act as a positive feedback mechanism and intensify cryptocurrency’s volatility.
Finally, the actual security of cryptocurrency significantly affects its volatility. With its decentralized nature and extensive process of validating each transaction, blockchain technology has been widely regarded as an extremely secure system.1 This promising facet is a main reason for its growth. However, in January of 2018, the hacking of Coincheck that resulted in a loss of $534 million in NEM coins startled investors further abetting its volatility.2
Despite the unpredictability of the cryptocurrency market, there is no denying the fact that cryptocurrencies and blockchain-related technology are ground-breaking technologies that will likely become widely integrated. Thus, many continue to invest in cryptocurrency, especially Bitcoin, the market leader. Fortunately, there is a more effective and secure way to invest.
The Cryptanite Wallet developed by Cryptanite Blockchain Technologies Corp. allows users to invest in diversified baskets of more than 20 of the top cryptocurrencies, including bitcoin, ethereum, ripple, stellar and dash, to decrease the statistical variance in profit accumulated (or volatility) and increase mean profits. This can be done by investing in cryptocurrency baskets preconfigured by the Cryptanite Wallet, such as HODL, HOOD and BASE, or by creating customized baskets of up to five cryptocurrencies. Just as the S&P 500 Index provides an excellent option for investors to decrease the variance in the stock market, the Cryptanite Wallet combats the capricious nature of cryptocurrencies through a secure, easy-to-use and frictionless process to buy, invest and store a diversified collection of cryptocurrencies.
- Barker, Jonathan Todd. “Why Is Bitcoin’s Value So Volatile?” Investopedia, Investopedia, 2 Jan.
- Williams, Sean. “The Biggest Cryptocurrency Hacks in History.” The Motley Fool, The Motley