Why is the crypto market so volatile?

23 June 2022

Question by Jane

Why is the crypto market so volatile?


Answered by Chris Broome

Hi Jane,

Cryptocurrency, like other emerging asset classes, fluctuates widely in price due to many factors, including supply and demand, investor opinions, government legislation, and the tsunami size wave of constant media hype.

Remembering crypto is still very new, the general lack of understanding around it means trading it is very speculative. You are ultimately 'betting' on the price going up (or down), and these speculations cause a sudden inflow or outflow, leading to high volatility.

You also have famous public figures (not to name names) adding to the volatility with their Twitter announcements - encouraging others to buy (some could say to push up the price). Just the same way that some 'star' investment managers buy/sell a particular company’s shares, the price of that share tend to rise/fall.

The ultimate decision on whether to invest into crypto depends on what the investment is for and how the rest of your financial planning is shaping up. Understanding that at all times your hard-earned money is being put at risk - you'd be wise to seek out trusted advice from an independent financial planner or adviser.

I hope this helps answer your question. Please let me know if you need anything else.

Kind regards

Chris Broome.


THE VALUE OF INVESTMENTS AND THE INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

Answered by

Chris Broome

Chartered Financial Planner

My name is Chris Broome and I own a wonderful fixed-fee and independent financial planning practice called Longhurst.