What is Market volatility?

Any security in the financial market moves on supply or demand, therefore, we see price moments or price fluctuations either stocks or cryptos.

Many countries are adopting crypto for digital transactions, but we can't do the same with stocks, so why do stocks exist, right? People are accumulating both for their investment purpose.

When companies perform well then obviously the share prices will go up.

In simple words, market volatility defines the high price fluctuations of any security, bond, commodities, stocks and cryptocurrencies.

Volatility plays an important role when we talk about the financial market, and because of volatility speculators can make huge profits in a single day and sometimes even in a few hours if you have accurate strategies.

Any stock or crypto price reacts to an increase in demand and supply and sometimes to news.

When demand rises, the market rises and when supply increases, the market begins to fall.

Accepting the fact, when any good or bad news is broadcast to the live market, it changes the whole game in a matter of hours, and the price makes unidirectional swings high and low, which is called market volatility.

Low volatility or high volatility are two sides of the same coin.

Low volatility means that the position in the market is stable, and the price moves up or down slowly.

To some extent, it is considered a chopper or sideways market. Low volatility gives one the confidence of low risk.

Specifically, high volatility occurs when a crypto or stock price registers a significant change in values.

This creates uncertainty among investors and people are afraid of holding assets in their portfolios. But if you have guts then high volatility yields high profits.

For example, we all know the perfect example of a decentralized currency – bitcoin. It has a fixed supply of $21 million.

People are hoarding it due to extremely high demand, but it does not continue to grow on the basis of fixed demand, it has also registered a fall in prices as news flow:

  • The first terrible drop occurred in June 2011, BTC fell 99% from its all-time high.
  • Short sellers reduced BTC crypto by 56% from its high in August 2012
  • Bitcoin fell 50% in December 2013 within 24 hours.
  • Market Leader – Bitcoin Falls 84% ​​from Top in December 2018

Because of these large price corrections, market volatility increases and uncertainty increases, this is called an extremely volatile market, when the asset's price moves more than 10–20% on either side in a day. High volatility carries a high risk as well as high returns if you can manage it.

Previous Next

This information is for educational purposes only and does not constitute investment advice. No person should rely on it to make any investment. Investing carries risks, including the loss of capital. All opinions expressed are subject to change without notice. Past performance is not indicative of future results. Always seek the advice of a licensed investment professional before making any investment.