Volatility: The Necessary Evil Of Cryptocurrency And How To Handle It

Part of what has cemented cryptocurrencies on the map since they exploded into the mainstream investor market has been their volatility.

Such volatility is a two-edged sword, and the cryptocurrency market has shown that in 2018 with Bitcoin's price shedding more than 50 percent at times from its year end price of $13,000.

The cryptocurrency market has also felt the ill effects of Bitcoin's volatility because as a result of the price drops, Bitcoin's trading volume, and even interest in the digital currency realm also decreases.

There is a lot to be said for the role that volatility played in helping cryptocurrencies reach the mainstream market.

Itai Cohen, CEO of Homelend, a mortgage crowdfunding platform has noted to Cointelegraph that within their scope of property and mortgaging, they see volatility as something that drives investors away from the cryptocurrency market and into more stable investments such as the housing market.

The problem is, if people enter crypto when the market is at its most Bullish, profiting off the upward volatility, they need to be strong enough to stomach it at its most Bearish, and the volatility takes a big down swing.

Assets, stocks, bonds, and even forex is prone to swings, but the problem is that cryptocurrency volatility is off the charts.

Essentially, the strategy says that there is no need to let 'day-to-day changes affect you' rather just hold onto your cryptocurrency to avoid the volatility altogether.

"The extreme volatility that characterizes the cryptoworld today is clearly linked to the very high yields they have generated in recent years. If we want the crypto to continue to offer triple-digit returns as an asset class, it is inevitable that volatility must remain high. Even if the same is also linked to liquidity, for which the crypto community will inevitably grow the more we will mitigate the returns to the volatility, Bernardi told Cointelegraph."

"This is already happening, because the volatility of Bitcoin in the first years of life was more than 300 percent per year, while now it varies between 50 and 100 percent per year. Currently there are no asset classes that have similar volatility except for the volatility of the VIX index which is a volatility indicator in turn."