As soon as Bitcoin was linked to ETF, its prices went sky high. Investors were in the hope that its prices would remain high. And immediately, their hopes too soared. And the Bitcoin, cryptocurrency prices touched $69,000. Gradually this bubble burst, and the hype faded into insignificance. And the prices too dropped to $50,000.
What do you call this? Is it not its volatility at work here? How can the price of something be affected so much with just some talk doing the rounds? Obviously, then it is volatile or else how could you see so much price fluctuation in one week?
What Is The Importance Of Bitcoin Volatility?
Now, what is there to do with volatility in Bitcoin? Why do people keep talking about it so much? Is the volatility of Bitcoins that important? Let us see here what its significance is.
If you are a novice in the crypto market, you must have heard of the volatility of Bitcoins. Why is it that people keep referring to that subject on and off? You must have by now heard of people telling you that you should invest that amount which you think you can do so comfortably. It is because it has the power to impact your portfolio in a matter of a few minutes or even seconds.
Probably in the history of cryptocurrencies, Bitcoin is the only currency that has experienced so many swings in its price charts. The swings are wide apart and can rock you anyway. You cannot be sure which way you are going to land. So in all probability, this hullabaloo is all to warn traders of its outcome and what may happen to them. This just might be why you should be warned of its volatility.
The Reasons Behind The Volatility Of Bitcoins
There are plenty of factors to affect the volatility of your Bitcoins. If you look at them in depth, they are as follows:
Demand Supply Gap
Not only Bitcoin but every commodity in this world is also affected by the demand of a certain commodity and its supply rate. And the same goes for Bitcoin. This is the prime reason for it being so volatile. You have to know how many Bitcoins are in circulation in the market today and what their demand is.
You will get an accurate picture of volatility and price probability. Its founder, Satoshi Nakamoto, default, has scripted 21 million Bitcoins as its limit. So naturally, the nearer you get to its extinction mark, the higher the price becomes. So if you have plans to buy Bitcoins, you should think now.
The Actions And Words Of Investors
This asset is gradually nearing extinction, so its demand is going up, and prices fluctuate according to its current demand. You know now that Bitcoin is the most desired cryptocurrency today. So its demand is always high.
And big investors, namely the whales, have a lot of Bitcoins in their custody. They are sitting tight with their assets. And if all these whales suddenly liquidated their assets, imagine what would happen to this market. Again what such investors speak also affects the market and its prices.
The Media And Its Power
Media is one of the most powerful tools that could either destroy or make a person or commodity. It is based on their reviews that the prices fluctuate. Most of the time, the media gives out inflated stories from people they consider experts. It does not turn out that they always are right.
Lapse In Security
Security is an issue with Bitcoins. Sometimes there are situations where accounts get hacked, and users stand to lose lots of assets. This security issue causes apprehensions in the minds of users, and this causes things to fluctuate a lot. But certain software and applications can produce fantastic results when used.
But on a closing note, you must remember that the whole concept is still in its nascent stage. So you will have to calculate every move of yours while you are striking in the market. Both the concept and the market have to come of age. You will then strike gold with digital gold.