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Will Cryptos Ever Beckon Sans Volatility?

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There are several types of crypto watchers nowadays - those who are already invested and are in-the money, those who are already invested and are out-of-money, those who have seen the first two categories and have chosen to wait and watch, and the fourth who know nothing more than, that cryptocurrencies are indeed very volatile.
Irrespective of the actual cryptocurrency exposure or the loss-tolerance threshold, volatility in the cryptocurrency space is the cynosure of all crypto currency watchers.

In the past week, Bitcoin (BTC) prices have moved between $39787.61 and $45080.40. It is currently trading at $43,688.84, gaining 0.86 percent over a 24-hour period and losing 0.35 percent over a seven-day horizon.

Likewise, Ethereum prices have moved between $2676.41 and $3173.54 over the course of the previous week. It is currently trading at $3089.12, gaining 4.14 percent over a 24-hour period and 0.03 percent over a seven-day horizon.

The extreme price volatility did have a direct bearing on the market capitalization of the coins. And though, most crypto currencies responded to the week's triggers, each have responded in varying fashions. Our customary review of the top-15 coins ranked based on the market capitalization as per coinmarketcap.com, reveals that the top-10 coins have retained their ranking over the course of the volatile week. (Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Binance Coin (BNB), XRP (XRP), Solana (SOL), Polkadot (DOT), Dogecoin (DOGE), Avalanche (AVAX) and Terra (LUNA) and in that order).

Algorand (ALGO) which was ranked 13 in our previous review has jumped two notches higher to rank 11, simultaneously pushing Litecoin (LTC) to rank 12 and Bitcoin Cash (BCH) to rank 13. Cosmos (ATOM) has retained rank 14, while Filecoin (FIL) has been pushed out of the coveted top-15 league. Polygon (MATIC) is back in the group of 15 after a brief hiatus.

The changes in the rankings underscore the fact that volatility is core to the crypto world. Rather, it is the pan-spectrum volatility in the crypto world that has drawn investors away from various financial and physical assets to the world of digital currencies.

If there is no potential for price gain (which in other words is favourable volatility), who would be enticed to the world of Bitcoins and Ethereums and Cardanos and Binance Coins and Ripples?

What drives the volatility in crypto prices?

One important reason why crypto currencies are so volatile is that the industry is still in nascent stage. Digital currencies are accepted very minimally in the financial mainstream and entrants into the crypto world do so secretly eyeing the period gains that are likely. When volatility is the sole motive in a cryptocurrency transaction, prices would be tethered to the whims of all kinds of speculators. When other motives like transaction settlement become more prevalent, the volatility would in all likelihood subside, if not abate.

The nature of supply of crypto currencies can influence prices and price volatility. Some coins have a predetermined maximum supply whereas some other coins have no caps on maximum supply. For example, the number of Bitcoins that can be mined is capped at 21 million. On the other hand, the Ethereum protocol does not cap maximum supply.

In certain cases, the investors holding large quantities of coins start selling, thereby influencing prices significantly. The extent of such "whales" and their holding has a bearing on price volatility. For example, in the case of Bitcoin (BTC), top-10 holders account for 5.37 percent whereas in the case of Litecoin (LTC), top-10 holders account for 15.22 percent giving them a greater command over prices.

Sans volatility, cryptos may never beckon, at least in the imminent future!

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