Does Volatility Really Matter?

Cryptocurrency is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrency is a digital payment system that doesn't rely on banks to verify transactions. Crypto has been in headlines for its good and bad reasons with its volatile nature. So, does volatility in crypto really matter? Then why is there still buying when Bitcoin had a 70% crash?

Bitcoin and cryptocurrency, is highly volatile in nature. Crypto prices soar and then seem to crash almost as quickly, while rumors, sentiment and fundamental developments are quickly factored into the market, because crypto generates no cash flow, traders have to rely on changes in sentiment to drive the price. Bitcoin prices in particular have shown a degree of seasonality to date, appearing to fall in value to lesser or greater extents in the spring before bouncing back in early summer.

Over the past seven days, crypto markets have plunged a whopping 24%, shedding $320 billion from total market capitalization. That figure, which encompasses all cryptocurrencies, fell to an 18-month low beneath $900 billion this week, marking a 70% drawdown since November.

The massive sell-off has paused a little today as markets recaptured that $900 billion level, but all digital asset prices are still bleeding out on a macro scale. This is nothing new, however, since it happened in 2015 and then again in 2018, resulting in 80% collapses in prices and a long-drawn-out period of consolidation known as crypto winter.

A report says, many fintech organisations are still buying more Bitcoin, despite deep losses across the cryptocurrency market. An expert says, the current selloff has been triggered by a wider risk-off sentiment that also impacted many areas of global stock markets. It’s happening as inflation is running red-hot and, therefore, encouraging central banks to tighten monetary policies, putting at risk the liquidity that has benefitted many asset classes, including Bitcoin.

Bitcoin is down more than 60% from its November 2021 all-time high. Despite the crypto crash, like many long-term crypto investors are still accumulating Bitcoin, by using the volatility as a buying opportunity.

Not all cryptocurrencies are created equal and some make more solid investment sense versus others deemed to be riskier. When we look at the fundamentals of each coin that you invest in and obviously, Bitcoin has the strongest fundamentals of any coin out there: It’s the longest running, it has a lot of institutional support and it’s very unlikely to disappear; there’s no central authority, so it can’t really be shut down.

Many feel that Bitcoin and other digital currencies are widely regarded as a shield against inflation mainly because of its limited supply, which is not influenced by its price. Few Bitcoin buyers felt that, viewing the current Bitcoin price dips “as discounts,” echoing the sentiment of the quote by the investment legend and the world’s fifth richest man, Warren Buffet, who famously said “Be fearful when others are greedy, and greedy when others are fearful.”