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WHY BITCOIN PRICES ARE SO VOLATILE - THE KEY FACTORS

If you are interested in cryptocurrency, you would have come across the term volatility more than often. There is apprehension surrounding the investment in cryptocurrencies, and this is even though there is a growing number of investors showing interest in cryptocurrencies like Bitcoin website. Although there are companies that are ready to embrace Bitcoin, there is a certain segment that is still apprehensive about the futuristic proposition of Bitcoin. 

This is primarily because of the volatility factor. The fluctuations of the crypto market are overwhelming, and in recent times we have seen a 20% dip in the price of Bitcoin. Last year the value of Bitcoin reached to mark of $60,000 and more, but today it ranges between $30,000 and $35,000. This has led to a major loss to the investors of Bitcoin. Does that mean that cryptocurrencies like Bitcoin are not going to last forever? Read ahead to know more about it.

The Rollercoaster Ride of Bitcoins: Why Are Bitcoins So Volatile?

Volatility, in simple terms, means that the market is highly vulnerable to fluctuations and changes. Although this factor also exists in the stock and share market but the frequency at which the market changes in case of bit point is far faster in comparison to stock in the trade market. 

It is because of this reason that people who compare Bitcoin with digital gold consider investing in gold to be a risk-free investment in comparison to Bitcoin or other cryptocurrencies. So what is the reason for this volatility? Below, you will come across some important factors which will help you know more about the frequent ups and downs of the Bitcoin market price. Read on to know more.

1. Lack of governance and regulation - Ever since Bitcoin was introduced in 2009, this is one factor that has been pounding the base of cryptocurrency. We know that the crypto market operates on a peer-to-peer transaction, and there is no 3rd party governance or rule existing in this ecosystem. This lack of governance and regulation is one of the key factors which makes investment in cryptocurrency highly risky. In addition, the identity of the user remains anonymous; hence in case of any fraud or scam, it is very difficult to trace the user.

Sentiments associated with it- Although Bitcoin is now garnering more attention and many new investors are putting in their money but still, the major portion of Bitcoin is controlled and owned by a limited number of investors. One such example is that of Tesla, and other names in the list are Wikipedia and Microsoft. 

Any kind of statement made by such investors has the potential to disrupt the value and pricing of Bitcoin. This was seen when Elon Musk, the owner of Tesla, announced his disinterest in Bitcoin and showed interest in Dogecoin. At that point, the value of Bitcoin had limited.

Limited supply- We all know that cryptocurrency comes with a limited supply. For example, in the case of Bitcoin, there are only 21,000,000 coins in the market. In comparison to it, the maximum supply of Litecoin is 84,000,000. Since the number of cryptocurrencies is very limited, it has an impact on their value. The principle of demand and supply also impacts the value of cryptocurrency.

Conclusion

Although this is a matter of concern, there has been considerable development in case of regulation being introduced in the cryptocurrency world. However, this is not a guarantee of a completely controlled environment existing in the crypto ecosystem. Despite all these facts, if you are ready to embrace the risk and ready to put in the money, then crypto investment can prove to be a profitable deal. 

To be a wise investor, you must first understand how the crypto market operates and what are the factors that have the potential to impact the value of cryptocurrency. Once you have an understanding of the same and you are confident to go ahead, you can register yourself on a credible platform. But how do you decide which is the right trading platform? Reading the reviews and a complete run through of the app will help you. Remember investing in cryptocurrency comes with a risk, but it has its share of profits, so be wise and then make an investment to save yourself from losses.

 

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