Will Bitcoin and the cryptocurrency market crash again?

You need to think about this knowing the reasons for volatility in the market. And maybe this volatility isn't such a bad thing.

There are several reasons for volatility in the cryptocurrency market. We'll start with the most obvious and end with the least obvious. 

- Lack of agreed upon valuation methodologies

Buying a share is buying a portion of the company's future earnings. Equity analysts agree that discounted cash flow analysis is the correct method for accurately valuing a business. There is no agreed-upon valuation methodology in the cryptocurrency space, and it is likely that existing models are not applicable to the field. As a result, market prices are highly dependent on sentiment. 

This is compounded by the fact that, unlike, for example, the American stock market, the cryptocurrency market consists of retail investors who have much less experience and who are likely to make hasty decisions - sell on declines and buy on gains.

- “Whale splashing”

Since the majority of cryptocurrencies are owned by a small number of individuals and companies, large holders can easily change the direction of the price movement in the market by selling or buying large amount of crypto - create splashes.

We have seen how such actions have already led to volatility before. For example, when the trustee of Mt.Gox sold $400 million worth of Bitcoin. Or when Bitcoin Cash forked and many proponents of the cryptocurrency were selling Bitcoin in huge quantities to invest in the new token.

One type of whale splashing is the infamous group pump and dump, where a group of whales invest large amounts of money in one currency to promote it and increase its price, and then sell it, profiting from the gain. 

- Liquidity (or lack thereof)

Compared to traditional markets like the US stock market, most cryptocurrency markets are quite small. Despite the huge growth in 2017, the total market capitalization of cryptocurrencies is still in the hundreds of billions of dollars - similar to the capitalizations of companies in the S&P 500 rating, and the company value of the leader of this rating is more than $23 trillion.

Most likely, the daily trading volume in the cryptocurrency market is also exaggerated. There is evidence that large centralized exchanges lied about their trading volume statistics.. The rest have opportunities and motives, but no one has caught them red-handed. We know that the statistics on decentralized exchangers are correct. Regulated exchanges like GDAX, Kraken, Gemini are required to provide this information. Information from centralized exchangers seems extremely dubious at best.

This leads to a huge amount of disruption in the market, hence volatility, even despite relatively low trading volumes.

According to recent research, the price of cryptocurrencies like NEO or IOTA, which have market capitalizations of more than $3 billion, could fall in value by 10% due to the sale of $50,000 worth of assets.

The previous three reasons for cryptocurrency market volatility should disappear or improve over time. Better pricing models will be developed, token distribution will become less concentrated, and as the area's market capitalization increases, so will liquidity.

- Programmatic Technology

The volatility of the Bitcoin and cryptocurrency markets is the result of the supply (and monetary policy) of crypto assets being determined programmatically.

For any commodity, a change in demand will result in a change in production. 

You grow avocados and the price suddenly increases by 100%, you (or someone else) will grow more avocados next season, driving down the price. If supply rises and falls with demand, changes in price should be much smaller.

In the case of cryptocurrencies, supply is determined by code, so the supplier has no ability to react to price changes. Since the supply schedule is fixed, an increase in demand should lead to an increase in price.

According to hackernoon.com