Crypto markets have been down for the last week, with no appearance of rising back up in the near future. How can such optimism that existed just fourteen days earlier when Bitcoin was back above $8,000 now have fallen so low? Will the crypto market volatility ever end?
All other issues aside, volatility has always been the Achilles heel of cryptocurrency markets. It has effectively kept new investors to the sidelines and given many institutions pause before going in with the rest of cryptocurrency enthusiasts.
It is important to keep in mind that the challenge with cryptos right now is not necessarily the price. After all, most cryptocurrencies are well above the levels they were at last year. The challenge itself is market volatility. Most investors want to know how to make money off their investment. This is true in standard currency investing or Forex as well, but crypto volatility with no real reason behind specific highs and lows means traditional investors lack the ability to frame a money making strategy around the cryptomarkets.
So what is causing the low prices right now? Why are they back down?
The short term trigger for the extreme price drop is the SEC’s postponement of their decision on the first ever Bitcoin ETF. Yet, this brings a deeper point and that is the lack of clear universal regulatory framework in really tackling cryptos. Things that investors take for granted in traditional financials don’t exist yet in cryptos and this is blocking out serious money.
Rudolf Medvedev of Ternion says the following:
“Well there is no clear way how to enter the market right now. With the lack of custody functions and with the lack of licensed counter parties.
There is no supply. Thus demand can not be satisfied.
So the price is going to the level where nobody would care about those aspects and just buy a lot. The cheaper the better.”
While newer platforms are beginning to address these issues, the appearance to many outside the crypto ecosystem is that price volatility is baked in and that means less traditional investment money in the cryptomarkets.
Essentially, cryptos are now going through what we can call growing pains. Without stability that comes with licensing, oversight, and security along with ease of use and crypto to fiat functionality, cryptocurrencies will continue to be volatile.
This is exactly the struggle between those advocating a far more inclusive and traditional approach to cryptos are meeting with resistance with the ideological enthusiasts holding onto the dream that at the end there will only be DEX’s. This is not realistic, but it muddies the water and keeps cryptos from attracting new investors that help stabilize the markets.
Although custody accounts and better oversight should have the desired effect, real stability must come by way of education and clear communication on what cryptos are and why they in the long term will be a valuable investment.