Volatility and market manipulation in cryptocurrency

This is a guest post, who would like to remain unnamed.

"Currently, there is no uniform international approach to Bitcoin and its legality will depend on where in the world that you reside. However, as gain more experience and knowledge about Bitcoin, and the cryptocurrency industry in general, it is likely that at least a certain minimum level of regulation will come into place in the vast majority of countries."
--Andrew Norri, Blockonomi


In recent weeks Bitcoin’s price has been steadily climbing. It’s not the kind of rally as seen at the end of 2017--where investors were made millionaires practically overnight; but anyone with a sizable investment in the cryptocurrency has definitely been seeing some respectable gains. However, the market hasn’t seen such an enormous shift in price since; which--unbeknownst to newcomers--harkens to the overall unpredictable nature of cryptocurrencies. Bitcoin may appear to be a lucrative investment from afar, promising huge returns over a short period. But that doesn’t take into consideration the factors driving the market, and the unspoken language seemingly governing its market trends. No--not the source codes (or white papers) underpinning blockchain’s technology--but the actual prime movers of the market, constructing the illusion of its alluring appeal.

A lack of general consensus on Bitcoin's regulation might be one of the challenges slowing down its mass-adoption, with cryptocurrency still being somewhat in its infancy. There is still plenty to learn about the industry and the implementation of blockchain. However, crypto isn't some rogue economy where there will be a rally every time someone sneezes (Or is it?). One could maintain that the vast majority of bull runs seen in Bitcoin's history were due to market manipulation. All the more reason to set a minimum level of regulation. So why is Bitcoin so volatile? Generally speaking, this dynamic is sometimes hinged on the confidence of investors; ie. Will geopolitical events and news headlines discourage investors, producing a widespread sell-off? Other factors to consider include the risks imposed by holders of larger proportions of the currency or the uncertainty of Bitcoins future and store of value.

The news plays an influential role in guiding the market. It’s no secret that those seeking to manipulate investors would use this to their advantage. Rumors of regulation, exchanges being hacked, fakeouts after slow and meticulous nail-biting rollouts (Verge)--you name it. Crypto has seen it all, to the detriment of wide-eyed investors. The bankruptcy of crypto exchange Mt. Gox back in 2014 is one example of how the news can negatively affect the market. Inversely, great news is likely to spur interest as more investors would buy into Bitcoin resulting in the price to climb. Bitcoin’s low liquidity can also cause price fluctuations whenever holders of larger proportions (upwards 10 million) seek to liquidate their position (Nathan Reiff, investopedia). None of these factors account for the purely technical aspects of crypto that are influencing the market as it stabilizes and matures.