The Volatility of Crypto Market
The Crypto market can be characterized in many ways. It can be considered engaging, dynamic, innovative, and can be regarded as volatile. In the past decade, the crypto market has seen many ups and downs.
The uncertain price swings have always kept the investors on their toes, as no one is sure about what can happen next in the market. Which coin is going to rise in prices and which coin is going to fall, has created many speculations, led to many debates, and price monitoring sessions.
The volatility of the market can be because of different reasons, including the increasing number of investors in the crypto market, innovations, and new advancements in crypto adoption.
Why is Volatility Concerning?
The volatility of the crypto market may not look very concerning at the top, but it is. It restricts the usage of cryptocurrency and is also one of the biggest hurdles in the mass adoption of cryptocurrency.
For any currency to flourish it must have a good level of price stability, which is missing in the case of cryptocurrencies and is also one of the most consistent criticisms that are faced by it.
To understand this, consider an example, a person goes to the market to buy a $100 item with cryptocurrency. When the person reaches the market, there is every probability that the amount of cryptocurrency that he had with himself would have increased or decreased in value. This could cause inconvenience to the person if the value of the cryptocurrency has dropped. This is also the major obstacle that prevents crypto from being a viable alternative to fiat currency.
The Solution to the Problem
The simplest solution to the problem is the widespread adoption of cryptocurrencies. People should look at cryptocurrency as a currency and not as an investment opportunity. If it is widely adopted as currency, stability can be achieved. Even the fiat currencies are also volatile, but their volatility in comparison to digital currencies is very low or negligible.
Stablecoins
They are cryptocurrencies that are capable of addressing the above problem. In simple language, they are cryptocurrencies that are backed by metals or are linked with traditional fiat currencies to preserve their value. Gold, fiat currencies, and even cryptocurrencies are being used to back Stablecoins. There are been a few failures in the past with come iterations, but newer iterations have shown great results and have been successful in terms of stability.
Currently, the only solution to the above problem is Stablecoins.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
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