Crypto assets are assets that move with very high volatility compared to other assets. So, why do these assets move more volatile than other asset classes?
#1 No Stable Fundamentals.
Crypto assets are not like stocks that have company earnings, bonds with fixed coupons, or real assets that have significant value. Most projects in crypto do not generate large cash flows and are only driven by speculative actions in the market, making prices very vulnerable to sentiment.
#2 The Market is Still New.
Unlike other markets that are already settled and established, the crypto market is still relatively small and the liquidity is also very low. This makes the market very easy to manipulate by whales and exchange owners with unlimited capital.
#3 Market Driven by News.
The community and market participants who are very reactive to news cause these assets to move very volatile, even small news that is not clearly true can affect price movements, causing prices to move very volatile.
#4 Leverage Significantly Worsens Volatility.
The culture of market participants who like to use very high leverage causes crypto assets to move more volatile than they should, leading to extreme price swings and liquidation events that can be very forceful and psychologically damaging for retail investors.