Understanding peer exchanges in the context of the supply in circulation and the volatility of prices
In cryptocurrency trade, point -to -point (P2P) markets have become an important player. P2P platforms allow users to exchange cryptocurrencies directly with each other without the need for intermediaries such as brokers or exchanges. However, this raises several questions about the circulating supply, price volatility and market dynamics.
Food in circulation
In traditional negotiation systems, the amount of cryptocurrency in circulation is determined by the supply and demand of forces in the market. When new parts are issued by mining or other means, they increase the available offer and decrease the value of parts existing. This phenomenon is known as food in circulation.
For example, Bitcoin’s circulation supply was about 13 million units at its peak in February 2017. While minors began to use Sha-256 for SCrypt mining algorithms, new parts were added to the network , increasing the available power supply available and decrease the value of existing parts, such as Bitcoin Cash (BCH) and Dogecoin (Doge).
Price volatility
Price volatility refers to fluctuations in the price of a cryptocurrency over time. As P2P markets emerge, they introduce several factors that contribute to price volatility, in particular:
- Feeling the market : The emotions and opinions of market participants can considerably influence price movements.
- Orders Flow : The number of purchase and sale orders on the market can have an impact on price management.
- Market liquidity : The availability of buyers and salespeople can affect price stability.
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P2P markets usually have more pronounced prices volatility than traditional negotiation platforms for various reasons:
* Lack of central authority : P2P markets operate without the restrictions of a single entity that controls the market.
* higher transaction costs : Use of decentralized networks can increase the costs and latency of the transaction.
* An increase in market complexity : P2P markets involve several players with different interests, leading to a more complex price dynamics.
Supply in circulation and pricing volatility
The relationship between circulation supply and price volatility is always an open issue in the cryptocurrency space. Some researchers argue that increased traffic may increase prices due to:
* Increased request : As new parts are added to the network, existing holders can sell their parts at higher prices.
* Reduced competition : Scarcity of a specific part can increase its value due to reduced supply.
On the other hand, others offer that the supply in circulation can lead to a drop in prices if:
* Excessive application occurs : When many parts are extracted or added to the network, available offer can become very high compared to demand.
* LACK OF RARITY : If a specific part has no inherent value or utility, its price may not be influenced by the supply in circulation.
Actor Price Volatility
To minimize price volatility in P2P markets:
- Use limited orders : Set the loss of stop and other types of commands to manage risk.
- Diversify assets : Distribute investments in various parts and asset classes.
- Monitor Market Feeling
: Analyze trends, news and social media to evaluate market emotions.
Conclusion
The negotiation of pairs in the context of the supply in circulation and price volatility is a complex problem with advantages and disadvantages. Understanding these factors, users can make informed decisions about their investment strategies and mitigate potential risks.