Can the law of diminishing marginal utility explain the volatility of cryptocurrency prices?

3 answers

• Nov 23, 2021 · 3 years ago
  The law of diminishing marginal utility states that as a person consumes more of a product, the satisfaction or utility derived from each additional unit decreases. In the context of cryptocurrency prices, this law can help explain why the initial excitement and demand for a new cryptocurrency often leads to a surge in its price. As more people buy into the cryptocurrency, the marginal utility of each additional buyer decreases, resulting in a decrease in price. Additionally, factors such as market speculation, regulatory changes, and news events can also contribute to the volatility of cryptocurrency prices.
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• Nov 23, 2021 · 3 years ago
  The law of diminishing marginal utility might not directly explain the volatility of cryptocurrency prices. Cryptocurrency prices are influenced by a wide range of factors, including market sentiment, technological developments, government regulations, and macroeconomic conditions. While the law of diminishing marginal utility can provide some insights into consumer behavior and demand, it is just one piece of the puzzle when it comes to understanding the price fluctuations in the cryptocurrency market.
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• Nov 23, 2021 · 3 years ago
  BYDFi, a leading cryptocurrency exchange, believes that the law of diminishing marginal utility does play a role in explaining the volatility of cryptocurrency prices. As more people enter the market and buy a particular cryptocurrency, the marginal utility of each additional buyer decreases, leading to a decrease in price. However, it is important to note that the cryptocurrency market is highly complex and influenced by various other factors, such as market sentiment and technological advancements. Therefore, while the law of diminishing marginal utility can provide some insights, it is not the sole determinant of cryptocurrency price volatility.
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