To understand the volatility of cryptocurrencies, it’s essential to first know how they work.
Cryptography is used by cryptocurrencies, which are digital assets, to safeguard and authenticate transactions and regulate the generation of new units.
They are decentralized and operate on a blockchain, which is a distributed ledger that records every transaction made.
The restricted supply of cryptocurrencies is one of the main causes of their volatility.
Most cryptocurrencies have a finite supply, and once the supply is exhausted, there can be no more coins or tokens.
This can cause the value of the cryptocurrency to skyrocket or plummet, depending on the market’s perception of its value.
Another factor contributing to the volatility of cryptocurrencies is the lack of regulation.
Cryptocurrencies are not backed by any government or financial institution, which means that there is no central authority to oversee the market.