How does commodities futures trading impact the volatility of cryptocurrencies?
Jonny LloydDec 25, 2021 · 3 years ago1 answers
Can you explain how the trading of commodities futures affects the volatility of cryptocurrencies?
1 answers
- Dec 25, 2021 · 3 years agoCommodities futures trading can affect the volatility of cryptocurrencies in several ways. Firstly, commodities futures trading can attract institutional investors who may not have previously been involved in the cryptocurrency market. The entry of these large investors can increase trading volume and liquidity, which can lead to increased volatility. Secondly, commodities futures trading can introduce new trading strategies and instruments, such as options and futures contracts, which can be used to speculate on the price of cryptocurrencies. These new trading instruments can introduce additional volatility into the market. Lastly, commodities futures trading can also influence market sentiment and investor psychology. If there is a significant increase or decrease in the price of commodities futures, it can create a fear of missing out (FOMO) or fear of loss (FOL) mentality among cryptocurrency traders, leading to increased buying or selling pressure and subsequent volatility in the market.
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