What are the reasons behind the volatile value of bitcoin?

Bitcoin

Significant factors influence the market value fluctuations of bitcoin. The volatility index is the tool that measures the volatility rate in the spot price of bitcoin. Rather than volatility index, there are numerous other tools to measure the volatility rate of bitcoin. Some of the popular volatility indexes include BitVol that provides accurate details. 

Lately, the market value of bitcoin has been extremely fragile. We have seen bitcoin falling and rising by 30% in just a single day. Checking out financial expert advice before investing in Bitcoin can help you understand the dynamics of trading it. You might wonder that why bitcoin is volatile. Let’s find out some crucial reasons responsible for the volatile nature of bitcoin. 

 

Alarming press declines adoption rate  

Bad press is a crucial factor that causes volatility in bitcoin’s market value. News events not in favor of bitcoin investors, such as a country regulating cryptocurrencies, a financial organization is criticizing bitcoin and a multinational company banning bitcoin as a payment method, which affects the market value of bitcoin. 

These events, most of the time, leads to panic selling. For example, Elon Musk, the co-founder of Tesla Motors and space x foundation, recently stated that tesla motors would not continue bitcoin payments until the energy crisis are resolved.

 The news created chaos in the market and declined the market value of bitcoin by an exceeding extent. Of course, we are all familiar with the most significant bitcoin heist, as a foreign exchange Mt. Gox was hacked with 800K. Recently, this exchange announced its bankruptcy and agreed to return 1 50,000 bitcoins to the user. Both the news of bankruptcy and Mt. Gox giving back to its user decreased the market value of bitcoin. 

 

Bitcoin whales 

Bitcoin whales are one of the primary reasons behind the extreme volatility of bitcoin. Bitcoin whales refer to individual or bitcoin wallets holding a gigantic proportion of bitcoin in circulations. The enormous bitcoin whale is the creator of bitcoin itself, Satoshi Nakamoto. Satoshi Nakamoto is speculated to be holding a million BTCs.

 Some multinational companies like Tesla motors and Micro strategy also hold a considerable amount of bitcoin. The movement of bitcoin whales in the marketplace affects the smallholders. If a bitcoin whale decides to hold the digital coins for a more significant period, it leads to a decline in the liquidity of these tokens. And if a bitcoin whale decides to move a large proportion of bitcoin units in a single go, it will ultimately bring down the market value of bitcoin. 

 

Security breaches 

In the past few years, bitcoin has been highly volatile when someone has breached or exploited the security of bitcoin networks. Bitcoin creators should publicize the security breaches to develop the best solution in the shortest period. Bitcoin is designed for the sake of the public, and the public must raise voices against security concerns to protect this network. 

 

Losses!

The news regarding high profile losses harms bitcoin’s market value volatility. However, experts say many cryptocurrency firms are not in the game only due to mismanagement, and one of the best examples is Mt. Gox. 

 

High inflation countries!

High inflation countries include Venezuela, Argentina, and a few others. Inflation means the change of supply or an incline in the market value of goods and services, whereas currency value remains the same. 

Undeniably, Satoshi Nakamoto developed this masterpiece to make a better payment system than the traditional one. But utilization of bitcoin as an alternate payment method in high inflation courtiers is extremely valuable. The volatility of bitcoin to the USD is very high compared to the volatility of any fiat currencies to USD. Venezuela has banned bitcoin as a payment method in the country as the inflation rate of Venezuela is the highest amongst all. Despite the bitcoin ban in this country, bitcoin mining is very cheap as electricity in Venezuela is very low. 

 

Summing up 

The volatility of bitcoin is characterized by many other factors, for example, taxation, cryptocurrency regulations, security exchange security breaches etc. These are a few of the energetic factors behind the volatility of bitcoin. Therefore, the volatility of bitcoin is a tremendous advantage for traders and investors. 

 

TechAdmin

Vince is a tech geek, has a passion for sharing knowledge and loves to tinker with different gadgets. Whenever he gets a new gadget he just open the box and figure out how the gadget works without reading the manual.

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