All those who deal in cryptocurrencies have this one common question that why is Bitcoin so volatile?
Like one day you see the price of Bitcoin and decide whether you have to invest in it or not. But on the second day, everything is changed. In short, there is just so much fluctuation in the prices of Bitcoin and if you really want to invest in this cryptocurrency then you need to keep yourself updated all the time.
A lot of people don’t even know that they can now buy bitcoin cash. In short, the need of the hour is to make some detailed study on Bitcoin and then start investing or buying it.
Coming back to the topic of discussion, this article is especially for those who really want to know about the fluctuation in the prices of Bitcoin. Today we will be telling you about all the factors that cause this fluctuation so that you can be more clear about your decision of investing in Bitcoin.
Factors That Cause The Volatility
As said earlier that not only Bitcoin, in fact, all of the cryptocurrency markets is extremely volatile and this isn’t something new, the fluctuation has been there for a long time now. Moreover, since last year, a lot of people have started mining cryptocurrencies because they have now finally realized that yes, this technology comes with a great potential.
- The one major factor that is pushing up the price of Bitcoin is that the total amount of this currency is limited and there are only a total of 21 million Bitcoins in the market. Till date, around 15 million Bitcoins have been mined and a very small amount is left behind. This factor is actually the major reason why the prices of Bitcoin are fluctuating all the time.
- The price of Bitcoin tends to go upwards with the passage of time because all the enthusiasts out there have a lot of faith in this cryptocurrency and to them, there is a lot of potential available in Bitcoin. So, the more the trust, the more expensive this currency gets.
- Bitcoin has already been distributed among a lot of people which is another factor that adds to its volatility and the fact that this propagation is increasing with the passage of time indicates that Bitcoin is always going to have some ups and downs when it comes to the price.
- People, especially investors, consider gold, silver, and other precious metals to be an alternate of Bitcoin. So, the change in gold, silver, and other stuff affects the price of Bitcoin too.
- Bitcoin is now being used as a proper currency and a lot of shopkeepers and markets out there have started accepting Bitcoins instead of cash. It’s pretty simple to understand that the more people will use this currency to buy their goods, the more it will increase in demand and hence there will be fluctuations in the prices.
- Unlike the other currencies, Bitcoin is limited and when anyone in the world trades something for a large number of Bitcoins, there is an instant price reaction in the market.
These are a few factors that result in the volatility of Bitcoin. There are several other reasons why this cryptocurrency is so unpredictable. For now, we hope you do understand why all the fluctuation occurs in the first place.