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Why is the value of Bitcoin so volatile?

Bitcoin traders are always worried about the volatile nature of the cryptocurrency. It is important for the traders to learn what makes the price value of these digital assets so volatile. Like most of the other trading assets, the price value of Bitcoin can be impacted by the supply and demand rules. When an increase in demand of the cryptocurrency, the price value also increases. On the other hand, there will be a decrease in the price value if there is a decline in Bitcoin’s demand. In simple words, we can say that the price value of Bitcoin will depend on how many people are looking to buy and sell the cryptocurrency. If more people are looking to buy Bitcoin, the price will increase. If more people are looking to sell Bitcoin, the price value will decrease.

You should know that Bitcoin can prove to be more volatile compared to more established currencies and commodities. This is attributable to the fact that the crypto market is relatively new and many investors believe it is still in its infancy stage. Even though Bitcoin has experienced massive growth in the last couple of years and is also the most well known cryptocurrency, it is still very volatile. As the size of the crypto market continues to grow, aany people believe that this volatility may decrease over time.

Bitcoin recently reached new skies when the price value soared above $50,000. The crypto market now provides investors and traders with more opportunities to make profits. However, it is very important to understand the factors that can have an impact on the price of Bitcoin. Let’s talk about some of these factors.

The bad press factor

Traders and investors are generally afraid of different kinds of events, including geopolitical events that the cryptocurrency could be regulated or statements from government officials. This means that harmful and destructive press releases could impact the adoption rate of Bitcoin negatively.

The fact that Bitcoin has a volatile nature is scary enough for the investors. Bad news could scare them even more and they will not want to invest in this digital currency. For instance, bad news like this was on the front pages when there was news that Bitcoin is being used to perform illegal transactions on the Silk Road. This news could cause panic and a decrease in the price value of Bitcoin. However, there were a few “industry veterans” who think that even negative news like this one is proof that the Bitcoin market is maturing. It is worth noting that the price value of Bitcoin started to increase shortly after the bad press wore off.

Fluctuations in price because of the total supply of Bitcoin

Another important factor that plays a part in making the value of Bitcoin volatile is the fluctuation in the perceived value of the cryptocurrency. You might have already heard or read somewhere that this digital currency is being compared with gold. This is because the developer(s) of the first ever cryptocurrency decided to limit production to a static amount of 21 million Bitcoins. In simple words, we will have reached the total supply limit of these digital assets once all 21 million Bitcoins have been mined. Because of this reason, there is a limited supply of these digital assets and the values may always be experiencing changes.

Security breaches

As we have discussed above, different news platforms and digital social media can play an important part in building a positive or a negative public concept. There has been news of security breaches in the network of Bitcoin and this makes the investors and traders think twice before they decide if they want to invest their money in Bitcoin. Bitcoin only exists in digital form and unlike traditional fiat currencies, Bitcoin can not be stored in your physical wallets. You will have to store your cryptocurrency in a digital wallet.

The blockchain network of Bitcoin is very safe as no private information is made available to anyone. All you have to do is keep your private access key safe and no one will be able to access your digital assets. However, as Bitcoin is a hot topic around the world such security concerns will definitely make the headlines and impact the price value.

Bitcoin holders

The volatility of Bitcoin can also be impacted by the holders of Bitcoin who hold huge amounts of this cryptocurrency. Think about it, there is a limited amount of Bitcoins and if someone decides to sell a huge amount of their stored cryptocurrency they will be seriously moving the market. However, previously people believed that no one would want to buy a huge amount of Bitcoins but as we have seen massive growth, huge investors are also looking to invest in the cryptocurrency.

Even though Bitcoin still has a volatile nature, the everyday price changes provide the traders with the opportunity to make profits. Traders are always looking to buy Bitcoin when the price is low and then later sell it when it goes higher. Trading can be made even easier with the help of a trading platform that offers automated trading, such as BitQL (bitql.org/). This means that even those who have little or no experience and knowledge of the crypto market can make profits through Bitcoin trading.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes

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