What makes Bitcoin so volatile?

Traders are always concerned about the volatility of Bitcoin. It is important to know what makes the value of this particular digital currency highly unstable. As with many other things, the value of "Bitcoin" also depends on the rules for supply and demand. As the demand for "Bitcoin" increases, so does the price. On the contrary, the decline in demand for "Bitcoin" will lead to a decline in demand. In simple words, we can say that the price depends on how much the retail market is willing to pay. When a large number of people want to buy Bitcoin, the price goes up. If more people want to sell Bitcoin, the price will drop.

It is important to know that the value of "Bitcoin" can be volatile compared to established commodities and currencies. This is due to the comparatively small market size, which means that a smaller amount of money can have a greater impact on the price of "Bitcoin". This inconsistency will of course decrease over time as the currency develops and the market size increases.

After & # 39; Bitcoin & # 39; Teased at the end of 2016, it reached a new record level in the first week of the current year. There can be several factors that make Bitcoin volatile. Some of these are discussed here.

The bad press factor

Bitcoin users are particularly afraid of various news events, including statements by government officials and geopolitical events that Bitcoin may be subject to regulation. This means that Bitcoin's acceptance rate will be affected by negative or bad press reports. Various bad news has instilled fear in investors and prevented them from investing in this digital currency. An example of bad headlines is the widespread use of "Bitcoin" in the processing of drug transactions across the Silk Road, which came to an end with the FBI's market shutdown in October 2013 & # 39; decrease in value significantly. On the other hand, veterans in the retail industry saw such negative events as evidence that the Bitcoin industry is maturing. So the "Bitcoin" gained value soon after the end of the bad press.

Fluctuations in the perceived value

Another important reason for the volatility of the Bitcoin value is the fluctuation in the perceived Bitcoin value. You may know that this digital currency has properties similar to gold. This is regulated by a design decision by the manufacturers of the core technology to limit their production to a static quantity of 21 million BTC. Due to this factor, investors can have fewer or more assets in & # 39; Bitcoin & # 39; invest.

Security breach messages

Different news agencies and digital media play an important role in building a negative or positive public concept. If you see something being promoted favorably, you will likely do so without paying much attention to the negative sides. There was news of Bitcoin security breaches that prompted investors to consider carefully before investing their hard-earned money in Bitcoin trading. You become too vulnerable to choosing a particular "Bitcoin" investment platform. & # 39; # 39 & Bitcoin; can become volatile when the & # 39; Bitcoin & # 39; community exposes security holes to create a great open source response in the form of security fixes. Such security concerns lead to the creation of several open source software such as Linux. For this reason, it is advisable that Bitcoin developers make security holes public to find reliable solutions.

The most recent & # 39; OpenSSL & # 39; vulnerabilities identified by the & # 39; Heartbleed & # 39; bug attacked and reported by Neel Mehta (a member of the Google security team) on April 1, 2014, appears to be adversely affecting the value of & # 39; Bitcoin & # 39; to impact. Bitcoin was reported to have dropped up to 10% against the US dollar the following month.

Small option value for holders of large Bitcoin shares

The volatility of "Bitcoin" also depends on whether "Bitcoin" holders have a large proportion of this digital currency. Bitcoin investors (with a current holdings of more than $ 10 million) are not sure how they would handle a position that expands to a fiat position without seriously moving the market. Therefore, "Bitcoin" has not touched the acceptance rates on the mass market that would be important to give large "Bitcoin" holders an option value.

Effects of Mt Gox

The recent damage to "Mt Gox" is another important reason for the volatility of "Bitcoin". All of these losses and the resulting reports of high losses had a double impact on instability. You may not know that this has reduced Bitcoin's overall float by almost 5%. Due to the increasing shortage, this also led to a potential increase in the remaining Bitcoin value. Nevertheless, the replacement of this buoyancy was the negative result of the following series of news. Many other "Bitcoin" gateways in particular viewed the huge failure at Mt Gox as optimistic about the long-term prospects of "Bitcoin".

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