Crypto Basic — II

Why is cryptocurrency more volatile than stocks?

The price of stocks and cryptocurrencies is backed by certain factors such as the value of underlying assets, supply and demand, and government regulation. The price of stock and crypto assets also change when those factors change due to economic disruptions.

The value of cryptocurrency heavily depends on the demand and supply of the token. When the demand for the token increases, the price also increases, and vice versa.

The demand for cryptocurrency primarily depends on its utility. The price of tokens such as SOL and ETH are higher because they have various use cases, and the demand is also high.

Demand also depends on government rules and regulations, media hype, and community sentiments. When EI Salvador declared Bitcoin as legal tender, the price of many altcoins went down in the market on the same day.

The price of meme tokens such as DOGE and Shiba Inu greatly depends on community sentiments and social media sensation.

A single tweet from Elon Musk has spiked the DOGE price in no time. The price of meme tokens will fall when community sentiments are negative. A viral post on social media can change the price of meme tokens.

Some of the following factors also contribute to the volatility of crypto

• Crypto is a new and emerging market.
• Market speculations are high on crypto compared to stock.
• Evolving technologies back cryptocurrency.
• Crypto is a riskier asset class due to its nature.

There is no regulating authority for Crypto…

The stock market has regulatory authority that protects the investors’ interest and regulates the business on the stock exchange. For example, SEBI for India and SEC for the US. Cryptocurrency does not have any such authority to regulate the functioning of the crypto exchange.

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