Looking for normality under abnormal conditions -Part 1
Market value is the transaction value of a company in the capital market, which can be known as the most effective metric to evaluate a listed company.
Evaluation of the Impact of Digital Assets on Financial Stability -Part 5
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Oct 11, 2021
2. Volatility risk
The price of cryptoassets has been very volatile. Volatility is especially important in assets that are not backed by any contractual claims, because their value does not come from the value of such contractual claims. Therefore, it is more susceptible to speculative activities.
High volatility may cause problems. Investors may not be ready to take the risk of a rapid boom-bust cycle and some cryptoassets, including Bitcoin, are vulnerable to flash crashes or sudden sharp drops in prices. Unlike regulated stock and derivatives exchanges, many cryptoasset trading platforms do not have measures such as fuses to mitigate price fluctuations, even if such measures are required by existing regulations. In addition, the high volatility of cryptoassets may make it difficult to be applied in payment or settlement.
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