The Concept of Cryptocurrency Stability & Volatility

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Greetings Everyone
Welcome to my blog, today we will be looking at a very common issue in the Crypto Market which is it's volatility and/ or stability. It's sure to be a pretty interesting post so kick back and enjoy it.

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What is Cryptocurrency Volatility

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In simpler terms, it is the fluctuations in the price of a crypto asset. From the first graphical representation on the cover photo which was a screenshot taken from Binance, you can see the price action and movement both at open and close price. It is the rate at which a token's price goes up and down during a certain period and volatile tokens are usually highly influenced by the invisible hand ( forced of demand and supply ).

Volatile tokens are usually both a good and a bad investment choice because if your analysis and speculation goes south your huge investment can turn to a tip. They are good in the sense that you bought when the coin is low then it moons just in time and your investment multiplies. It can be bad in the sense that you panic buy or buy the dip and it's dips even further. In times like this due to FUD, you end up selling instead of HODLing then you would be working at a loss.

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Advantages

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✓ It brings in more people into the crypto world. Most newbies I know in the crypto space today joined because they have a Friend or two making huge sums from just buying and selling cryptocurrencies at the right time. This makes the crypto market boom even more become of the increasing number of buyers.

✓ It acts as a capital multiplier. With the right amount of technical analysis and fundamental analysis, if you enter into the market at a good time and invest smartly your $50 can easily turn into $500 and from there on out one can be a multi millionaire from the comfort of their home.

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Disadvantages

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✓ The higher the volatility, the riskier the investment and the riskier the investment the higher the loss. Those crypto newbies who start without a good mentor look at the chart see a coin mooning but due to FOMO, they buy at the all time high. Then when they see the coin dipping aggressively then due to FUD, they sell hence making tremendous loss.

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What is Cryptocurrency Stability

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Stability in cryptocurrency has to do with a coin which has been pegged to a fiat currency usually the US Dollar. No matter the fluctuations in the crypto market, the price would never stray far from the price of the fiat currencies. For instance USDT, during a serious crypto dip it can go to $0.99 and during normal and moon periods, it can go to $1.01. Stable cryptocurrencies are always used to substitute for fiat currencies in the crypto world because one can convert their coins to a stable coin and HODL if they don't trust the volatile currencies.

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Advantages

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✓ It's stability makes it secure and a good coin to use in holding.

✓ it's stability makes it easier for businesses to accept it as a means of payment without avoiding significant losses.

✓ They have relatively low fees. If one transfers ether from one wallet to another, there would be huge fees compared to when one transfers BUSD from one wallet to another.

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Disadvantages

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✓ It cannot be used to make reasonable profit as it's value is expected to stay stagnant. It's pegged to the dollar hence the demand and supply of the crypto market has no effect on them.

✓ Not all stable cryptocurrencies end up staying the same price as the US dollar. Let's take for instance SBD ( Steem Backed Dollars ) as the name literally says, it's meant to be a stable currency but we see it averaging prices like $10.

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Conclusion

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It's always good to do our research before jumping into volatile markets so we can know when to enter the market and when to leave so we don't end up making losses. It's also good to take advantage of the stability of stable cryptocurrencies.

Thank you for reading

Cc. @steemcurator05

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