Before we go into the reasons behind this, let's first know what we are referring to by "volatility." Simple terms, it is the measure of how the speed at which an item fluctuates. If a cryptocurrency is unstable it can go quite high in a relatively short period of time or drop equally quickly.
Imagine that you're riding on a roller coaster. Certain parts in the journey are smooth but others are filled with changes and ups. The prices of cryptocurrency work in a similar way. A day you could observe a coin such as Bitcoin rising a great deal however the following day, it may decrease just as. This can make investing in crypto appear like an adventure, however it could also be quite intimidating if you're not prepared.
What is the reason for this? Contrary to many traditional investments cryptocurrency is a brand new kind of asset that has unique rules and trends. They don't have the same history as bonds or stocks and they remain in the process of finding their niche in the world of finance. Their newness, in addition to other distinct characteristics, is the primary reason for their high volatility.
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