Why do some investors believe that the law of diminishing marginal utility can explain the volatility of cryptocurrencies?

3 answers

• Dec 26, 2021 · 3 years ago
  Some investors believe that the law of diminishing marginal utility can explain the volatility of cryptocurrencies because they argue that as more people invest in cryptocurrencies, the marginal utility of each additional unit decreases. This means that the satisfaction or value derived from each additional unit of cryptocurrency decreases over time. As a result, investors may be more willing to sell their cryptocurrencies when the price is high, leading to increased selling pressure and price volatility.
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• Dec 26, 2021 · 3 years ago
  The law of diminishing marginal utility suggests that the more of a good or service an individual consumes, the less satisfaction or value they derive from each additional unit. In the context of cryptocurrencies, some investors believe that as more people enter the market and buy cryptocurrencies, the overall utility or value of each unit decreases. This can lead to increased selling pressure and price volatility as investors become less willing to hold onto their cryptocurrencies.
  487163
• Dec 26, 2021 · 3 years ago
  From BYDFi's perspective, the law of diminishing marginal utility can indeed provide some insights into the volatility of cryptocurrencies. As more people invest in cryptocurrencies, the market becomes more saturated, and the potential for price fluctuations increases. Additionally, as the market matures, investors may become more rational and less prone to speculative behavior, which can also contribute to increased price stability. However, it's important to note that there are multiple factors at play when it comes to the volatility of cryptocurrencies, and the law of diminishing marginal utility is just one possible explanation.
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