Why are crypto markets so volatile?
10 August 2022
Question by Jane
Why are crypto markets so volatile?
Answered by Simon Peters
Crypto is a volatile asset class as it is still at a very nascent stage compared to other markets. It is not as liquid as other markets - like the forex (foreign exchange / currency) market, or the stock and bond markets for example.
Liquidity is a term that generally refers to how easily an instrument can be bought or sold without affecting its prices. Because crypto markets are not as developed in terms of liquidity as forex, stock or bond markets, any big market orders on crypto exchanges can move prices significantly.
As the asset class matures though, and more participants join, then theoretically liquidity would increase and crypto markets should not be as volatile as they are currently.
