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Your Guide to Understanding Market Volatility

If you’re new to crypto trading, it can be overwhelming to see the price of cryptocurrencies moving up and down within minutes. However, volatility is the major factor that traders follow to make profits in the crypto market.

Just like the price of cryptocurrencies must increase or decrease for you to make a profit, traders can take losses due to volatility in the market. So, you can either be on the good side of crypto volatility or experience losses on the bad side. 

To be on the good side and reap profits, you need a good understanding of what volatility means in the crypto market, what causes it, and how to reduce its effects to make a profit. This article will be a comprehensive guide explaining everything you need about crypto volatility.

What is Crypto Market Volatility?

Crypto market volatility. Source: Cryptopolitan

Crypto market volatility measures how much the price of cryptocurrencies or related assets has moved within a particular period. Talking about time here means that crypto volatility can be measured in seconds, minutes, hours, days, or even years. 

Generally, volatility can be defined as the sporadic up-and-down price movement of tradable assets within a short period. In the crypto market, volatility is extremely high, making keen study necessary. 

The crypto market is very volatile compared to other financial markets, as the price of cryptocurrencies can increase and decrease quickly within a short time. For instance, one can see the price of a cryptocurrency at $0.90 in the morning and then come back in the afternoon and see it at $10.5. In the same way, they can see the cryptocurrency’s price at $20.5 in the morning and come back in the afternoon and see it at $0.05.

It is crazy how the price of cryptocurrencies can go up and down in the crypto market, but this is how traders make or lose money. To make money with the fluctuations in the market, one needs to know what causes them and how you can utilize them for your benefit. 

How is Crypto Market Volatility Measured?

Source: Coindesk

In most cases, when people discuss measuring crypto volatility, they often talk about historical volatility. In other words, they are simply trying to measure the volatility of the past; 

Historical volatility is the volatility of a cryptocurrency in the last seconds, minutes, hours, days, weeks, months, and years. Besides historical volatility, there is another known as implied volatility, which measures the future movements of a cryptocurrency.

Why is it Important to Understand Crypto Market Volatility?

Every crypto trader must understand how cryptocurrency volatility works to succeed while trading. It is a must-have skill as it helps you properly assess and manage risks before you initiate investments.

For instance, if you, as a trader, don’t evaluate the volatility of a meme token like doge , you won’t know if they will make a profit or loss while trading. So learning about the volatility of cryptocurrencies helps a crypto trader make more profit while reducing losses. 

What Causes Crypto Market Volatility? 

Below are some factors that contribute to the volatility in the crypto market. 

Supply and Demand 

Supply and demand are the primary factors that cause the fluctuations happening in the crypto market. The major reason cryptocurrency’s price will move up and down in the market is the availability of the crypto in the market and how people want it. 

A cryptocurrency with huge demand in the crypto market that is also scarce is more likely to have a huge price increase. In contrast, any readily available cryptocurrency with less demand in the market will drop in price. Since the demand and supply of many cryptocurrencies can easily change at any time, it leads to volatility in the market. 


Whales are crypto investors that hold particular cryptocurrencies in large numbers. The activities of investors that hold cryptocurrencies in large amounts can easily affect the price of a cryptocurrency. For instance, if a whale that holds a large amount of Ethereum sells it has every, the Crypto price will instantly lose value. 

Media Hype 

Media hype is a huge contributor to the volatility in the crypto market; social media is the major hype source. The hype surrounding a cryptocurrency on major social media platforms such as Twitter can increase or decrease its price, depending on the situation. 

For instance, if the hype or news around a cryptocurrency (Bitcoin) is positive, it is more likely to increase in price. And it has a high chance of decreasing in price when the hype around it in the media is negative. 


Regulations in different countries contribute to the volatility in the crypto market. When a country bans the use of Bitcoin or other cryptocurrencies, it negatively affects the price of many assets in the crypto market. When a country legalises cryptocurrencies, it often at lead prices surge among cryptocurrencies. 

How to Reduce the Effects of Crypto Market Volatility


Outrightly, a single or even a group of investors cannot stop volatility, but they can surely reduce the effects. Sometimes, an investor can make a profit and then lose all of them because of the fluctuations in the market. Whereas there are ways an investor can reduce the effects of the volatility of cryptocurrencies. 

Crypto Exchange In Use

Regardless of your measures, the platform on which you trade your digital assets will determine if you succeed or fail. 

BingX has amazing features that help you watch out for volatility when trading, such as TradingView , technical indicators, and access to trading signals from expert traders.

Dollar-Cost Averaging

The first is using dollar-cost averaging, as it can help reduce the amount of money a trader will lose due to volatility. Dollar-cost averaging is when an investor consistently invests a certain amount of money over a particular period. For instance, instead of investing $10,000 outright in the market, an investor can invest $100 consistently until the $10,000 is finished. 

Use Of Stablecoins

Another way of reducing the effects of crypto market volatility is by switching all profits to a stablecoin. A stablecoin is a crypto asset pegged to an off-chain asset with a stable price, for example, the US Dollar. 

Once a crypto trader makes a profit, they can easily switch those proceeds to stablecoin to avoid the volatility affecting them. 

Now That You Understand Volatility: Trade Safely on BingX

As mentioned earlier, the platform on which you trade your digital assets with volatility determines if you succeed or fail. BingX is a leading global crypto exchange with authorised license to operate in over 100 countries worldwide. 

With numerous trade enhancement features such as TradingView, technical indicators, and access to trading signals from expert traders. You are sure to achieve better outcomes on BingX.


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