When a currency is not available in physical form, it is either in the digital form or in electronic currency. A Cryptocurrency is a digital form of currency, which is only accessible virtually on computers or mobile phones. However, you cannot consider all cryptocurrency currencies stable like digital currencies. It is subject to fluctuations because it is traded on the basis of consumer sentiments instead of market trade. Let us discuss the factors that are likely to affect the volatility of cryptocurrency in 2020.
Bitcoin : Volatility Of Cryptocurrency
The first decentralized cryptocurrency that fails to lose its luster, even after a decade, is the Bitcoin or BTC. Bitcoin is a preferred cryptocurrency choice of investors over Ethereum (ETH), Tether, (USDT), and XRP because it has the highest market capitalization. Though volatility cannot be ruled out, the risk factor is somewhat subdued because numerous investors participate in Bitcoin. Furthermore, the intervention of reputed brand names, such as Microsoft, Subway, Overstock, Paypal, and many more have made the investment in cryptocurrency fruitful.
Volatility Market Index Of 2020
The volatility index or VIX measures the market trend to predict the expected trend in the next 30-days. Supply and demand affects the cryptocurrency exchange curve. The volatility index is swayed based on economic, political, and global situations around the world. The trade war between China and the USA brought an unexpected 60% jump in BTC prices. As the economy across the globe came crashing down during the upsurge of the pandemic, it affected the cryptocurrency. Bitcoin came crawling down by 44% along with the rest of the world. However, the Crypto Franc currency (XCHF) attempted to remain stable. January 2020 showed a robust status of cryptocurrency. Though BTC/USD had a slow start at $9,300, towards the end of February 2020, BTC/USD rolled up to $10,0i00. The XRP/USD pair played up and down in January. Within a few days, it went back and forth from $0.19 to $0.30. ETH/USD pair did significantly well within a month – from $181 to $300. The top cryptocurrencies traded in 2020 are BTC/USD, ETH/USD. XRP/USD, LTC/USD, and TRX/USD.
Blockchain Technology: Volatility Of Cryptocurrency
Blockchain technology is a dependable exchange platform for cryptocurrency. All functions related to trading, transferring, etc. are transparent and accurate. It maintains the transaction record in a decentralized form, which does not require the intervention of central authority. The involvement of blockchain technology makes cryptocurrency more lucrative.
Authoritative Control And Regulation
A high-risk factor is involved in cryptocurrency because its distribution does not come under any central authoritative control. Due to the lack of a regulatory forum, manipulating the market becomes a regular occurrence. Thus, volatility is bound to exist in the remaining 2020 due to the absence of any monetary authority. After weighing the pros and cons of dealing with the unhindered flow of the market, a legal framework is yet to be constructed to regulate cryptocurrency.
Cryptocurrency Store For Value
Unlike fiat currencies, cryptocurrency is not backed by the central government. Though the store of value of cryptocurrency is compared to fiat currencies, it is not recognized as a legal tender. Despite the hurdles, Bitcoin, ETH, etc. are capturing the market for holding potential value for the long-term. The rate of fluctuation of cryptocurrency as a store of value cannot be determined in the present. Thus, watching the rising trend of the transaction, cryptocurrency contenders expect that digital currency will replace fiat currency and enter the mainstream. However, economists are not in favor of cryptocurrencies because it is not traceable. Thus, fiat currency is facing fierce competition with cryptocurrency. Even if cryptocurrencies do not overtake fiat currency, it will definitely exist alongside to cater to the wholesale market in 2020.
The volatility of cryptocurrency helps investors and traders to reap gains from buying and selling. Selling cryptocurrency when the market is high just before it crashes could result in earning decent money. Though digital currencies like cryptocurrency are non-traceable in terms of disclosing its net worth, the transaction of digital wallets is here to stay.