Written by Metal Team

On August 29, 2019

Why did the price of my cryptocurrency change?

Metal University Educational Series

One of the most frequently asked questions we receive from our users is why the value of their cryptocurrencies can change so rapidly – and why their prices change at all in the first place. Understanding what it is about cryptocurrency that allows prices to frequently change involves understanding some fundamentals about economics in general, but we’ll break it down into a quick refresher on cryptocurrency “volatility.”

So what is it about cryptocurrency that allows prices to swing often, and sometimes by large percentages? Let’s explore this concept using Bitcoin (BTC) as an example.

A New Kind of Investment

Unlike bonds, precious metals, real estate, or stocks, cryptocurrency is one of the newest options for investors. Cryptocurrency was invented about a decade ago, although the idea for crypto existed long before that. However, widespread investing in cryptocurrency has only just begun. As a result, there are fewer norms and habits in this market, which gives investors few examples to follow and fewer ideas on what to expect when prices change. BTC is the oldest cryptocurrency for investors to choose, so fluctuations in BTC’s price are often due to newcomers not knowing what to expect.

Media Buzz

When a story breaks about anything from trade tariffs to job reports, markets move in reaction to the news. We see this happen often with stocks; as we learn about trade tensions or quarterly reports, the overall performance of the Dow Jones Industrial Average or the S&P 500 can rise or fall quickly. Cryptocurrencies behave no different in the markets and are sometimes seen as an attractive alternative to traditional stocks whenever economic news becomes too murky or chaotic. The impact that media stories can have is amplified when looking at particular coins, too. When BTC makes the news by announcing new updates and technical achievements, the price of Bitcoin might change quickly. This can be due to new market buyers learning about an exciting new option, or existing market buyers and sellers gaining more (or less) confidence in their choice.

Fewer Players

Compared to traditional stocks or bonds, there are relatively few people buying and selling cryptocurrency at any one time. The crypto market still sees a high daily trading volume, but its relative newness and lack of regulatory clarity has kept large investment firms and mutual funds from joining for some time now. As clearer regulations are passed and the crypto market matures, we expect to see larger market buyers participating and trading crypto as well. This is precisely why our team at Metal has been assisting Congress with understanding what cryptocurrency/blockchain is and what regulations are needed, while simultaneously partnering with other organizations and industry leaders. We want to see the crypto market mature and more people join in, and we’re working hard to make that happen.

The bottom line: cryptocurrency is a new, exciting industry with a smaller number of buyers than older, more traditional options. As a result, media buzz and regulatory uncertainty can cause prices to swing daily. However, as the market matures and more buyers enter the field, prices will likely become less volatile and more stable.

Do you have other questions about BTC, ETH, MTL or cryptocurrency in general? Be sure to follow us on social media and ask us a question! We’d love to clear things up for you, and your questions just might find its way into our next quick lesson.

Twitter | Instagram | Facebook | Steemit

Other Metal Pay posts:

Metal Pay 2.5 is now available!

Metal Pay 2.5 is now available!

We love finding ways to make cryptocurrency easier for you to use, which is why we’re thrilled to bring Metal Pay 2.5.0 to our iOS users. With this update, Metal Pay takes another step closer to our vision for how integrated cryptocurrency and personal finances should...

Metal (MTL) is now listed on Uniswap

Metal (MTL) is now listed on Uniswap

We’re thrilled to announce that Metal (MTL) is now available on Uniswap! Uniswap is a decentralized exchange (DEX) that runs a protocol on the Ethereum blockchain, allowing traders to trade ETH and ERC20 tokens directly from their Ethereum wallets. You can trade MTL...

Metal Pay welcomes Paxos Gold (PAXG) to our Marketplace

Metal Pay welcomes Paxos Gold (PAXG) to our Marketplace

While there are lots of different types of investments, people often use broad categories to describe where they are investing their money. Stocks represent a share of a company, bonds represent your trust in the issuer; real estate represents ownership of private...

Metal Heads-up – August 2020

Metal Heads-up – August 2020

August is one of those busy months where the sleepy days of summer give way to a whirlwind of activity. Parents around the country are scratching their heads trying to figure out how school is supposed to look this year, and college students are doing the same. While...

Metal acquires Bloks.io

Metal acquires Bloks.io

Friday, Aug 21 2020, Los Angeles California. Following its recent acquisition of Lynx, and the launch of its Metal X cryptocurrency exchange, The Metal Neo Bank Payment Platform has acquired Bloks.io, the leading Block Explorer and Dev Team for EOSIO. With over 10,000...

Metal Heads-up — July 2020

Metal Heads-up — July 2020

Ah, the dog days of summer. Everything seems to be getting hotter these days - from the temperature, to the cryptocurrency markets. While we’re seeing record-breaking highs across the United States and around the world, we’ve heard that several altcoins are...