Why Are Crypto Markets Volatile? – The answer to this question is – because they are free. There are few things more misunderstood than the idea of freedom. It has a different meaning for different people. It spans a broad ideological spectrum from fundamental human rights to won privileges.
The idea of Bitcoin was financial freedom. Libertarians embrace it. It is a decentralized innovation based on borderless computing platforms that have given stimulus to new paradigms of creativity and thought. The global collaboration has supported individual opportunities and lowered financial boundaries.
The civilization`s progress revolved around finding the balance between little and much while swinging from one extreme to another.
However, financial market participants need to bond to disclosure and reserve requirements in order to avoid catastrophic systemic risk.
Volatility as a badge
Rules evolved to dampen volatility due to the wild damage swings can do to livelihoods and portfolios. The New York Stock Exchange has circuit breaker procedures to temporarily halt certain stocks or close the entire market if necessary. In this case, investors do not have the power to do anything about this.
These rules evolved because the volatility seems to be bad for people. We can see the anti-volatility prejudice throughout this week’s mainstream coverage of crypto market recovery.
However, volatility is not a bug for crypto investors, but it is a feature. It is a feature because it highlights the relatively unique freedom of the market. Crypto markets can be considered volatile because there’s no central authority that can stop this process. Therefore Crypto asset prices represent investor sentiment.
This week, not all of the swings were the free expressions of market opinion. More of the idea of volatility came from the closing out of short and long positions in the derivatives of crypto.
However, market freedom in the more regulated jurisdictions is toward the wealthy, with retail investors that lack opportunities for their own good.