Many people are hesitant to invest in cryptocurrency due to its high volatility. People are afraid that they might lose their hard-earned money by investing in it. However, because of a lack of research, they fail to realize the benefits of the crypto market and its direction towards financial superiority.
Therefore, in this article, we are going to help you adopt the right cryptocurrency investing mindset.
1. Volatility in Cryptocurrency
Volatility is the rate at which the price of an asset or security increases or decreases in a given period. Cryptocurrency is being criticized all around the world for its high volatility and being a precarious investment. These speculations usually petrify new entrants from investing in the market.
The most recent example of volatility in cryptocurrency is when Bitcoin was trading at around $20k in December 2020, and in January 2021, its price crossed $40k.
This price spike kept going until it reached an all-time high of $65k before it crashed down to around $30k in May 2020. This shows how unpredictable and volatile the cryptocurrency market is.
2. Why is Cryptocurrency More Volatile than Equity Market?
Cryptocurrency is far more volatile than the equity market, and given below are some of the reasons why.
2.1. Not Backed by Major Companies
Cryptocurrencies are incredibly volatile because, unlike the equity market, major companies or analysts do not back them. There are significant companies that must regularly and publicly share the performance of the equity market.
These companies use their previous knowledge about the equity market to predict how they will do in the future, making it a lot less volatile than cryptocurrencies.
2.2. Public Trust
Stocks investments are the de facto way used for ages to prepare people for their retirement. People from almost all fields know that they must invest in stocks to be able to retire. That is why you see teachers, carpenters, and even students having an entire stock portfolio.
Public trust in the equity market allows it to stabilize and be less volatile. But there is a lack of confidence in cryptocurrency that makes it volatile.
2.3. Totally Digital
Cryptocurrencies are totally digital, which means that any physical commodity does not back them, and the price is purely based on supply and demand. It also means that cryptocurrency is prone to cybersecurity attacks.
Recently, a group of hackers stole around $600 million worth of Bitcoins. Another major reason for the volatility of cryptocurrency.
3. Adopting the Right Mindset for Investing in Cryptocurrency
Having the right mindset means being open-minded, optimistic, and not complaining. So to have the right attitude to invest in cryptocurrency, you need to follow two basic principles.
The first principle is to only focus on the opportunities and not the problems. Don’t let the issues deviate you from your path. Only think about the positives of cryptocurrency, even if there are few. Make a decision based on the opportunities and be optimistic about it.
The second principle is to take action and stick to it. One of the major limiting factors is fear when your hard-earned money is involved, but don’t let the fear deviate you from entering the cryptocurrency market. Have faith in your action, stick to it and make a difference.
