Volatility: Crypto and Fiat in Comparison
One of the most popular arguments that opponents of Bitcoin and other cryptocurrencies produce is that of excessive volatility. Thus, the sometimes extreme price fluctuations on the crypto market are a major hurdle for the mass adaptation of cryptocurrencies as a means of payment. But are cryptocurrencies really so much more volatile than some fiat currencies, which are taken for granted as a means of payment?
The volatility of a cryptocurrency is also its curse and blessing. A blessing because it enables high profit margins, especially for short-term day traders. Curse, however, when it comes to reliable and predictable payments, such. As salary payments or non-speculative purchases goes. A stable external value is obligatory for a single currency in order to enable efficient economic management.
Volatility also an issue in Fiat currencies
Volatility is always measured relatively. That is, one currency - whether crypto or fiat - behaves volatile to another currency. This is the only way to calculate the foreign trade value of a currency. Not only crypto currencies, but also Fiat currencies are traded against each other - with a much larger volume. The foreign exchange market is the largest market in the world with around $ 5 trillion in daily turnover, while the crypto market is just $ 15 billion at the same time.
Of course, the higher liquidity of the foreign exchange market makes it much less volatile than the crypto market. However, the stability of the foreign exchange market as a whole does not mean that there are not even local currencies with extremely high volatility.
The same applies in reverse for the somewhat more volatile crypto market. There can be cryptocurrencies, which show relatively stable over a longer period of time. Crucial here are not just the individual crypto currencies themselves, but above all the general market sentiment.
@tradewonk, For sure Crypto is Volatile and that is because, Crypto Sphere is in infant and initial stages.
And early adopters hold the more domination and in my opinion they are playing the roles of the Market Movers.
As we know it is in Infant phase, so there is lack of knowledge about the Sphere and inturn we can see that scams are increasing all over the world.
But we have to understand one aspect and that is, we have to see the Institutional Investors so that we can see the more Stable Crypto Prices.
Wishing you an great day and stay blessed. 🙂
It is a heat issue about the cryptos. I agree with the idea that it is the handicap of the criptocurrencies as a means of payment. But if we see it from the investment point of view you are in front a traditional subject: risk.
As in any investment you decide how much you want to expose. So lets check the performance of the queen of fiat currencies (dollar) and the bitcoin until today at 21:50 (-4 GTM) according with MarketWatch data
The U.S. Dollar Index (measure of the value of the US dollar relative to a basket of foreign currencies).
Bitcoin price
So, you decide where you put your confidence and for how long.
I agree crypto currency is very volatile and risky. But with high risk comes high rewards.
One can avert losses by diversifying.
Great piece!
the wonders of market is volatility, that hwo traders make money, when they spend the money, it will distributed to the people on spending. thus, boosting economy.
Personally I think this is because of the relative newness of the technology. Given time this extreme pull will become minimal allowing for bigger and better investment. However this is an opportunity for early investors to capitalise on the extreme, which allows for better gains or losses. This is the best time to embrace crypto and the blockchain technology
we are more acceptable on newer tech nowadays, perhaps we are more eager to see what next tech can offer. everyone is trying to be the frontier of the latest and best things available. thanks to the revolution of smartphone.
Opponent of Cryptocurrency blame that Crypto currency is responsible for all type of crime and illegal activity, even they do not see the loop hole in fiat currency and also not see positive side of Crypto like it can save lots of money on printing of fiat currency, fast transaction and no corruption.
Fiat currency market is also very volatile Indian government ban crypto trading though banks in India, if you see Rupee price it is falling day by Day against USD.
Agree
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Great article, thanks for sharing. I think people need to understand what makes a currency valuable. Imagine if crypto was first and then fiat?
The high volatility of crypto is slowing down its mass adoption. most fiat currencies seem stable because of their high liquidity. Almost all fiat currencies are more liquid than even the most popular cryptos out there because of their large user base. the more a currency can be exchanged for goods and services, the more liquid it'll become. Cryptos can hardly attain the level of liquidity of fiat because its user base is still low.
The crypto volatility is really great for day traders like me.
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Crypto and blockchain is a new technology, it will take time, Blockchain is being adopted by many famous companies etc and that's a win for Crypto.
Crypto can give you big profit and on the same hand, it can also give you big lose too!
That why it is suggested that, invest an amount that you can afford to lose.
totally agree with u, i believe blockchain will be our future technology :)
Great artical . I know crypto currency is very volatile and risky . It mining and transfer too risky .