Bitcoin went public in 2009 but gained in popularity only in 2010. It was then that the price of Bitcoin rose from a few fractions of a dollar to $0.09. There has been no looking back for Cryptocurrency since then. It has seen an upward moving graph. However, there is no denying the fact that it has sometimes seen a plunge in the graph. The price has gone on increasing since then with falls at certain times. But you can depend on the digital money to make the most out of your investment in Bitcoins.
Bitcoin has had a very turbulent history where its volatility is considered. It has gone through sudden highs and very sudden lows. This roller coaster ride has taken in a span of a few hours only. Now there are certain reasons that govern this volatility.
Factors That Determine The Volatility of Bitcoins
Every commodity in the market experiences the demand-supply gap factor. This causes the prices to fluctuate. Like other commodities, Bitcoin has experienced a gap in demand and supply. The price depends on how many coins are being minted and how many are being circulated. People’s willingness to pay for it makes the price go up. Cryptocurrency has been designed to have 21 million Bitcoins. When the supply touches its capping limit the prices go higher.
But people cannot say when this limit will be reached and when the prices will go up. But if the limit is reached there is no end to a person minting money out of it. Again, at the same time, it is predicted as very volatile because of its unpredictability.
The Actions of Investors Are Also Responsible
As Bitcoin is gaining prominence, its supply is also getting limited, another reason for its prices going up. Some investors have long term plans for Bitcoin investing they are willing to part with their assets, and they are not paving the way for smaller investors. Thus, it means they are hoarding, leading to a crisis and its price is going up.
The world’s top 10,000 investors are holding One-third of the Bitcoins and suddenly if they exchange all of their Cryptocurrency assets into fiat currencies then the price would fall tremendously. Thus again it proves that Bitcoin is very volatile and can make you gain well one day and make you lose the other day.
The Market Runs on The Sentiments Of Investors
Bitcoin does not have a store value like that of gold, and no one controls it. It does not even have the backing of physical commodities like the traditional financial system. You cannot fall back on anything to evaluate your Bitcoin assets. The currency depends for its value on the sentiments of the currency users.
If the currency finds favor in the sentiments of the market, its value will automatically shoot so high that it could make any Tom, Dick or Harry a millionaire. But if it happens otherwise, then any millionaire may fall down to become a pauper at any moment. It is so volatile.
There Is No Binding Regulation In The Market
As you must know by now that Bitcoin depends solely on the blockchain for its existence in the market. People worldwide sitting in different corners at different machines are running it. This means there is no control over it, and no regulations even govern it. So quite naturally, its fall and rise are inevitable and, thus, it is the cause of its volatility.
Fickle Minded Investors
An investor need not be an expert to invest in the market. If you want some fast hard cash, invest some money in it and withdraw it as soon as the profits trickle in. But it is exactly these types of investors who cause the market to fall. And since there are many such investors, the market becomes volatile. But if you are lucky enough, you can make a lot from this very market and come out like a king.
As of today, Bitcoin is the top-ranking cryptocurrency in the market. According to some experts, people who invest in Bitcoins have a bright future with loads of cash and assets and walk around with their collars held high.