As days pass by, Bitcoin and everything related to cryptocurrency become more and more engraved into the everyday lives of us all. What this means is that people are no longer wowed by the properties that BTC brings to the market anymore, meaning that there are only a few people actually looking forward to these developments and not for the selfish reasons of making as much money off of it.
Most people who are currently engaged in BTC trading, or anything related to the blockchain views it as nothing more than investment opportunities or even a day job to generate as much profit as possible from the market. This draws a very distinct line between blockchain advocates and profits advocates.
The difference between value gained through innovation and the value gained through adoption is very different, thus causing the volatility to sometimes spiral out of control due to poor understanding of a new innovation being implemented in a particular network. Take any market downfall or rise into account. There is always one very simple pattern. Almost everything moves based on the performance of BTC. Be it growing together with the coin, or contradicting it in movement. This then causes further complications in the market as people expect either one or the other, thus making volatility something like a self-fulfilling prophecy.
However, this is not something new for experienced traders from way back. In the past, when stock trading and even currency trading became massively accessible to the public, the same level of volatility could have been seen. Even though almost every price movement was justified with a corresponding event in the industry, it was still mostly based on the machinations of market makers or large shifts from retail traders to a specific sentiment, bullish or bearish.
Nowadays, things have calmed down a bit with traditional markets, making them a bit more predictable and easy to navigate as volatility has reached a maintainable level. Very rarely do we see an overnight tripling of value, but with cryptos, it’s taken as a bad sign.
Stabilizing investment times
There were very few people in the past who would invest in Bitcoin or any other crypto for the long term, making the market even more and more volatile as volumes kept on growing due to minuscule profit gains with different currencies.
Nowadays though there are a lot more different ways of trading BTC, key of which is the long-term trading strategy. Sure, it may seem like one of the least time consuming and skill-heavy strategies but it has worked out for many in the past. The current state of the market is already showing signs of stabilization due to the distribution of information about Bitcoin as well as the distribution of the total available coins to many different individuals. This ensures that no one sell-off is going to disrupt the market too much without everybody else coming to its rescue.
This phenomenon has managed to change the perception of many crypto traders in the past year or so. They are starting to see that the more people start using cryptocurrencies, the more the market stabilizes due to equivalent distribution and better control. Even when an asset is decentralized it immediately shifts towards balance without one single body coordinating it.
Is less volatility good?
There are two ways we need to look at this particular question. Both of them have their answers, Yes and No.
Is it good for traders? No, absolutely not. Traders rely on market volatility to find opportunities for profit. If the prices don’t change as often or as much, then there is very little to gain from the crypto market and they would switch to a more profitable one.
Is it good for users? Yes, absolutely. Why? Because people who “buy” Bitcoin for the sole purpose of using it for online purchases and transactions want to have the safety of stability. For example, imagine you just paid 1 BTC for your car. 1 BTC was worth $10,000 at the time of the transaction. The next day you find out that the price grew and it’s now worth $12,000. You immediately feel guilty for not waiting and buying a better car for arguably the same amount you’d be paying.
This creates a massive issue for merchants more than it creates for the consumers. Merchants can’t really support a BTC transaction method through their own resources if they don’t have a guarantee that people will use it. Furthermore, they face the same issues with volatility. What was a disadvantage to the consumer that we mentioned earlier, is an advantage of the merchant and vice versa. It’s a very peculiar business model that wouldn’t really last too long, especially with the price changes we are seeing currently.
The stabilization of volatility in the crypto market guarantees implementation due to more people being confident in using these specific assets as a means of exchange. Currently, there is no guarantee, thus making full crypto integration essentially impossible.