Want to Buy Ethereum but Wondering what Factors Influence its Volatility in 2022?

If you think about what to invest in next, the cryptocurrency market is good. However, it wouldn’t be right to recommend investing in the crypto market without informing you about its volatility. Like the stock market, cryptocurrency is more volatile. But don’t think about its volatility as a disadvantage, as you can take advantage of the volatility of the crypto market.

For example, investors buy Ethereum, which is ranked one of the most volatile cryptocurrencies in the market. These investors buy Ethereum when its price is low and then sell when the Ethereum market recovers. It’s quite an intriguing trading strategy to make money with cryptocurrency. The catch here is to know the exact time to buy Ethereum. So if you are wondering what factors influence the volatility of Ethereum, you’re in the right place. Here are four factors that influence the volatility of the Ethereum market.

Ethereum is slightly less decentralized

Investors who buy Ethereum experience huge price fluctuation because the Ethereum network is not completely decentralized. It is decentralized in the sense that the Ethereum network is partly under the rules and regulations of a body but that a small number of accounts owns a huge percentage of Ether. The top 100 accounts own roughly 39% of all Ether in existence.

With this analysis, you should oversee the impact on the Ethereum network. Imagine what will happen when these top account holders decide to sell their crypto; it will cause the market price to crash. Or imagine what will happen when they buy crypto when the price is down and how much they can get out of the Ethereum network. And in a way, it feels like a rip-off from the pocket of other investors, but with a good strategy, you can overcome this downside.

Fragile investors

Another reason why the Ethereum market is quite volatile is because of what is called fragile investors. They are called fragile investors because they sell at every chance fragile investors get and buy Ethereum at every chance they get. Their aim in the Ethereum market is to profit from it and not utilize its other benefits. Because, unlike other cryptocurrencies, Ethereum fuels the DeFi and NFT market.

While the use of Ethereum is quite vast, fragile investors are not in it for these benefits. And because these fragile investors are in the picture, their activities make the market volatile. When the market price is up, they want to sell, which will cause the supply to surpass the demand, causing the price to drop in no time. Similarly, when the price is down, they want to buy, which will cause the demand to surpass the supply causing the price to rise. As an investor who wants to buy Ethereum, observing the activities of fragile investors in 2022 will help you with strategies when to buy and when to sell your Ether to make a profit.

Developing technologies

New and innovative technologies on the Ethereum network can also influence its volatility. As we said earlier, the use of Ether goes beyond simply as a payment option. Smart contracts, DeFi, NFT, and any other scalability function of Ethereum can influence its volatility. The more useful a technology is on a crypto network, the more investors it will attract. Call it the law of attraction!

However, when the scalability of a technology introduced on a network is not validated within an expected timeframe, it can cause a sudden downward pressure. This failure can influence the volatility of the crypto market, causing it to crash since some investors will opt-out. But in the case of Ethereum in 2022, things have been going well, especially with the emerging growth of NFT around the world today. Hence, we can all expect Ethereum to even increase in value now more than ever.

Speculations

One last thing to always have at the back of your mind as a newbie crypto investor is that speculation is a huge driving force of the crypto market. Investors are always making predictions about what to expect from the cryptocurrency market. While these speculations are good as they give investors a heads up, sometimes their effects can be adverse.

Speculations can cause panic amongst investors, making them sell short, trying not to lose. In other words, when there is panic, it causes a sudden influx or outgo of money, leading to high volatility.

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