Does number of traders affect volatility?

[Queentoshi]

The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

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Day by day the number of people will increase and the amount of people's needs will also increase.  As people's familiarity with cryptocurrencies continues to grow.  And as people become more involved in cryptocurrencies, the number of e-traders will naturally increase. So now the number of traders in the market is more. And yes of course traders are also affect volatilities. Although not all traders are affected by this volatility, being affected depends on the trader taking trades. And because one trader is affected by volatility, another trader gains profit. So I will say that yes traders are also affect by volatilities but the affect traders amount will be large scale on who trade with no skill.

[Oshosondy]

Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

People trade bitcoin than shit coins but why bitcoin is less volatile than shit coins? More people trade gold but gold is less volatile than bitcoin? More traders does not mean but the marketcap is what that is very important. The lower the marketcap of a coin, the higher the volatility. Not about the higher the number of traders.

[Zaguru12]

Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders,

Yes the volume of open trades this days signifies that there are many traders coming into the market and as you said increases volatility but that doesn’t mean it was less easier than before, one thing I think traders like most is that high volatility and the traders now are enjoying the benefits not to talk of numerous strategies or indicators or fundamentals used to get accurate information on trades this days which to me makes it easier than in the past.

So for volatility rate yes most of the Altcoins without much volume on it are kind of volatile but those with already high volumes like bitcoin have less volatility.

[Frankolala]

The higher the market cap of a coin, the lower the volatility, and the lower the market cap of a coin the higher the volatility. This is the reason why you can see those shitcoins do have 100x profit, and 1000x profit because they have low market cap, and this is why it is not advisable to invest on new coins because they can crash to zero due to the pump and dump scheme.

The cryptocurrency community is expanding, and that is why we are having more people going into trading for a means to make profit, but that would not affect the volatility of the coin. @Oshosondy gave a good example using gold. Trading has never being easy before and now, but with some new trading tools, if you understand how to use them, you can make it easier for you.

[Dr.Bitcoin_Strange]

A high number of traders doesn't affect volatility; if it does, it's just minimal. If you use the forum search to search for topics related to price volatility that have been discussed before, you will read about the different factors that contribute to price volatility, such as supply and demand and positive and negative news. Note that price volatility is trending in two directions: either up or down, so would you say that when there is a price decline, it's as a result of fewer traders? Lol, funny how that would sound. 

Take, for example, what @Oshosondy said: so many traders love to trade Bitcoin/USDT pairs, and it's a pair that is mostly traded, but why do shitcoins and altcoins get more volatile in terms of price decline or sudden pump? 

[Davidvictorson]

The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

In my own opinion, I think that an increase in the number of traders, particularly retail traders, can play a role in increasing the volatility in the cryptomarket. Even though I know that there are other factors that also come into play to influence volatility. However, from the question standpoint, If there are more traders, it simply means that we would see more and more activities and these traders strategies which differs in all aspects would have a corresponding effect on the market as it changes. This is what lead to volatility.

[palle11]

Does the number of traders directly affect the volatility of the market?

I will not think so that numbers of traders will cause a volatility in the market. Volatility is caused by increase in trade, if you have plenty traders who don't add to trade so it won't create that increase inflow. A trader who is just in the market and not trading create no influence or vibes in the market therefore there won't be that increase volatility.

What create volatility is not numbers of traders but the volume of trade. Example if you have a trader who throws in 2 billion dollars to buying bitcoin , that will further increase the volatility because big funds has entered the market.

What create volatility is huge cash inflow and not the number of traders. That huge cash inflow can however be generated by few traders or more traders.

If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

Numbers of traders doesn't make trading easy or not. It can only affect market cap. If a coin has a large marketcap then it doesn't crease easy volatility especially if the coin doesn't have high utility like bitcoin. Therefore, it is easier trading bitcoin than other coins despite marketcap because of bitcoin dominance and trend of movement. If a trader spot the trend like we are now on bull, it becomes easier to trade on bitcoin.

[adaseb]

Generally when a market has more traders there should be less volatility because there is more liquidity. However right now we are getting a surge of new traders all buying up bitcoin, Ethereum , Solana on leverage and when there is a deep pullback like we had it can get ugly.

What you don’t want is too many one sided leveraged trades. We have crazy high funding rates and it’s not looking good. We need more spot buys. When you see the perps are leading the spot market then it means a minor correction can be on the way.

[mk4]

Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

Theoretically and generally, yes it does affect volatility. But the factors affecting volatility are definitely more than just # of traders, namely — liquidity, trading volume, etc. It's all those factors altogether. So no, we can't make an accurate assumption based on a single metric.

[Litzki1990]

The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

There are certain categories of investors who are definitely affected by the volatility of the market and by the volatility of the market they themselves become restless and take various wrong decisions. This is a very common point, if a trader cannot accept this common point then how will he take the big risk of trading later on. A trader has to face all kinds of challenges including mental risk financial risk and those who can accept all these challenges are successful in trading. We should not be disturbed by the temporary instability of the market. There is volatility in the market that is why a trader invests in the market. But there are many stable coins in the market but investors do not invest in those coins because the market of those coins does not change. We must understand that there is volatility in the market of these coins that is why traders buy these coins.

[jrrsparkles]

The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

Ofcourse yes, more trades, more volume then it will likely to bring more orders with different price ranges but those who you are mentioning more likely to be retail traders who might not make big difference in the volatility range unless they are getting going into trading and starts practicing more and more but as far as I know 9 out of 10 people enters into trading drop their decision in very few months and move on to find other ways.

[SquirrelJulietGarden]

Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

New traders mean the market has more newbies who don't have experience in this market and they usually will be new fishes and losers in the market. New traders are keen on using leverages and even high leverages for trading.

They are favorite victims of market makers and centralized exchanges for trading fee, funding rates and liquidations.

I agree that increasing number of traders will affect the market volatility but there is another more important factor, capital in the market. Trading volume will be more important for impacts on the market volatility.

[Yamifoud]

The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

As the market buy/sell demand increases, that certainly affects the volatility of the market price. Less volatility means less activities in the market. That is why we couldn't make ourselves confident of our strategies that worked in the past as someday this is not effective anymore. Traders make the market more volatile. However, we can say it has a negative impact on the market making it too risky, and should look more into market analysis. But on the other side, this will also help us active traders to possibly earn more every day.

[Dailyscript]

The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

Obviously more traders will affect volatility. This is because if there are more traders there more people who are willing to buy and sell bitcoin. Thus affecting the price of bitcoin everyday. In other terms, the demand and supply will increase significantly which will know that this is the reason for volatility.

[famososMuertos]

It is relative, not absolute, that is, if there are increase, traders allow the price variable, in percentage factors to only be effective depending on supply and demand, (obvius, Right?) so this increase in price variables only has an effect if there are customers, and fortunately there are more buyers and sellers of bitcoin who are not engaged in trading 24/7/365.

[Nrcewker]

Yes this does affect. The volatility of a coin is determined when the price fluctuates a lot. Now why does the price fluctuates? It’s due to the traders only. When traders buy or sell the coin, it lead to the increase and decrease of the price. Now if more number of traders do it simultaneously, then the price can drastically drop in huge scale. Hence number of traders are directly proportionate to the price of the coin and volatility. Hope this helps you OP.

[serjent05]

The number of traders is increasing more than before as more people are generally becoming more interested in ways to become more financially independent and as thus in search of skills like trading.
Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?

Correct me if I am wrong but I believe it is not only the number of trader that makes the market volatile.  Yes the number of trader may affect the volatility of the market but I think it depends on the number of factors affecting the market.

Investopedia clearly explained the factors that affect market volatility.



Anyone can click the image for further explanation about the factor that affect the volatility of a market.

Yes this does affect. The volatility of a coin is determined when the price fluctuates a lot. Now why does the price fluctuates? It’s due to the traders only. When traders buy or sell the coin, it lead to the increase and decrease of the price. Now if more number of traders do it simultaneously, then the price can drastically drop in huge scale.

Or the market may rally in a huge scale if the demand outweighs the supply.  Wether the price goes up or plummets depends on which outweighs the other one.

Hence number of traders are directly proportionate to the price of the coin and volatility. Hope this helps you OP.

I think it is more proportionate to the liquidity of the coins... since the number of traders does not entirely define the volatility of the market due to the many factors affecting the market volatility.

[Assface16678]

Technically yes, because traders or investors are the ones who make the market move, every engagement or every trader a trader does could affect the movement in the market, lets take example of what we call whales, they are the investors that brough a very huge amount of assets and because of that they greatly affect the market the scary part is that they could also manipulate the market, I know crypto currency is cannot be controlled but because of people having such huge amount of assets they could change or influenced the movement in the market, more over a single individual could not do it all of course, if for instance a large group of whales could turn the tides either beneficial for them or for other investors. But in terms of traders, which are increasing, I don't think there will be a great effect unless they open and close a big trade.

[nelson4lov]

It depends, especially in certain market conditions because there are times there would be plenty of traders but the market will barely experience any volatility. For instance: When buyers and sellers in a tug of war and the market ends up being in an indecisive state. In such a situation, there were plenty traders but prices would barely move. This happens from time to time.

To conclude, I'd say a 50:50 chance because there are other factors that would affect the market enough for it to be volatile.