Bitcoin is proof that people are willing to take huge risks in order to gain profits. In fact, many of cryptocurrency investors don’t even have an idea how the blockchain technology works. What is clear however is that huge profits could be made in a short period of time.
Since Bitcoin reached its height at almost $20,000 and fell drastically by as much as 30% in one day, many are now looking to diversify their portfolio. For some, it is the hunt for the next Bitcoin.
Expect Wilder Ups and Downs
Let’s take a closer look at what happened to Litecoin last week. Litecoin was designed by a former Google engineer. According to its founder, Charlie Lee, his goal is to not surpass Bitcoin but rather to create a silver standard to Bitcoin in Litecoin. This newer cryptocurrency is a faster version of Bitcoin. Though Litecoin has four times more supply of coins than Bitcoin, this didn’t stop investors from becoming interested in Litecoin.
In fact, cryptocurrency investors are looking at things a bit differently. It has increased from $100 on December 8 to $370 by December 12. That’s a 270% jump. Though the price dropped down from its peak, Litecoin has jumped by more than 7,000% in 2017 alone.
What Caused the Wild Swings?
What exactly made Litecoin to shoot up in a short period of time when there weren’t any news? There were no technology improvements made or even a new version to the digital currency. So what exactly influenced the demand for Litecoin? Experts believe that it is due to the presence of an exchange where cryptocurrency investors could easily buy Litecoin.
Cryptocurrency investors have Coinbase which is the center of cryptocurrency speculation. It makes buying and selling easy with its easy sign-up process. Coinbase already has around 13 million users by the end of November. There was even a time when Coinbase was the most downloaded app by iOS users.
Litecoin was just added to the Coinbase lineup in May. During that time, it had the lowest price available on the platform. And since it was cheaper than both Bitcoin and Ethereum, a good number of speculators have invested on the coin and sharply increased its value.
Irrational Investors
It is quite normal that there are irrational investors that can affect the prices of cryptocurrencies. In fact, nominal share prices are usually the ones that shape buying decisions treating virtual currencies like a lottery ticket.
According to experts, a combination of extreme gains, high volatility, and low nominal prices make the perfect scenario for assets to be treated like a lottery ticket. This basically increases the propensity of investors to gamble rather to understand what the technology really means.
This Trend Will Continue
We can all expect for this trend to continue in the coming years. There are more than 1,000 different cryptocurrencies today. It is only a matter of time that one of these cryptocurrencies become easy to trade that more people will become interested in investing. Because of this, we can expect wild price swings for different cryptocurrencies in the coming months.
