Many in the cryptocurrency market believe that the cryptocurrency market will affect the other financial assets, but the answer to this question is entirely new. As the volatility of cryptocurrencies is highly persistent and they cannot sustain their present prices, it is a well-known fact that their prices will change, and there is a belief it will affect the other assets. The bitcoin prices have been between the $30,000-$44,000 range in the last week, but it is necessary to understand that it will not affect the other financial assets. The phenomena are like a cross on a ship of assets, leverage and market functioning. You have to address several important categories if you want to understand these, and they are given below.
Will the current volatility continue?
This question is completely unnecessary because every bitcoin trader knows that the volatility associated with cryptocurrencies will stay as long as the cryptocurrencies will stay. The present volatility in bitcoin is very high because of the tug of war which has been very multidimensional and tense. The main reason cryptocurrencies came into notice, especially bitcoin, is the pulling force between the private and public sectors. There are high chances of this phenomenon being more intense in the coming future because this tug of war between the private and public sector will not come to an end soon. There are high chances that each side will try to pull it on their own, and therefore, people who are common investors are likely to face problems just the same in the coming future.
It was just ten days ago when the private sector industries were enforcing and accelerating the growth of cryptocurrencies. Even the tech giant Tesla announced that it would accept bitcoins as a mode of payment for purchasing its new electronic-driven car. The statement was made by Tesla after it had bought $1.5 billion worth of bitcoin in February, and it had led to the enforcement of the cryptocurrency market. The bitcoin but there are several other cryptocurrencies as well which experienced an increase in its price because of this action of Tesla. Cryptocurrencies like bitcoin attracted more investors because of this, and it has been a cycle of increase in prices for bitcoins, says Bitcoin mining. The momentum was completely unstoppable a few weeks ago, but then the scene changed. The prices of bitcoin started to decline because of several important actions taken by the Chinese government and the owner of Tesla.
Several banking institutions in different countries of the world are still worried about the action of cryptocurrencies on their economy. They are worried if it will take over the market of their economy completely and impose a threat to the financial system of that particular country. Other countries did not respond well to these worries, but China connected and imposed a complete rejection of cryptocurrencies in the financial system. Now, the financial system in China is no longer run by cryptocurrencies. Bitcoin and other cryptocurrencies are not also not allowed to be accepted by the financial structure of China. There are several other countries as well, like the United States, which are imposing and modifying the rules for the regulation of such cryptocurrencies and their trading. Still, they do not impose such strict rules on bitcoins and other cryptocurrencies.
The point is, there is barely any action of the volatility of bitcoins on the other traditional asset classes. It is proven by the different analysts of cryptocurrencies as well as the stock and securities market. Cryptocurrencies are not existing in the real world, and therefore, they can never replace stocks, bonds and another commodity in which people can invest their money. Some several people and economists believe that the cryptocurrency market will take over the stock market in the future, but that is not true.
Being incapable of existing in the real world, bitcoin can never replace the Fiat currency of any country. Therefore, there is nothing to be worried about the connection of bitcoins and their volatility along with their effect on other financial assets. Cryptocurrencies may become the future currency without replacing the Fiat currency or stock market, but it will have to look after the energy consumption it takes to mine cryptocurrencies.
