Bitcoin came into light in 2010 when it rose to $0.09 from some fractions of a dollar. Since then, it rose tens and thousands of dollars upward, and at some days, this movement can be seen in a single day. We have seen days when Bitcoin’s price fluctuates in thousands in a single working day. So, why is Bitcoin System app? What leads to this level of volatility in Bitcoins?
There are numerous reasons behind the volatile history of this digital currency, and understanding these reasons isimportant if you are thinking of investing or trading in this domain.
- Supply and demand of Bitcoin
Bitcoin is limited to 21 million coins by design, and the closer we get to this number post-mining, the higher the prices are going to get. There is a lot of hype around Bitcoin, and every investor is trying to get hands-on at least a fraction of it. On the other hand, miners are in full throttle with their mining activities. This has ledto unusual and unpredictable trends at the time which is also known as the volatility of Bitcoin. For some investors, it’s something not to be played with, while some suggest that it is the best opportunity to make short-term gains.
- The Hype
The hype created by social and electronic media also plays a key role in it. There is hardly a day when a news portal or a social media page does not mention Bitcoin. This has attracted a lot of new investors especially young investors. This hype benefits Bitcoin, but with it also comes some inexperienced investors who get into the market in the fear of being left out. They make some unpredictable decisions and initiate panic selling, which disrupts the market and makes it volatile.
- Investors’ Sentiments
Investors have invested their hard-earned money in Bitcoins with high hopes for its future. It has attracted not only individual investors but also some of the giants from financial investment institutions. At times some of these giants with tens and thousands of coins, also referred to as Bitcoin Whales, dump their holding, which fluctuates the market leading to masses initiating panic selling. Some exchanges are trying their best to control this volatility by capping the liquidating capacities.
- Government Regulations
Compared to the traditional fiat currencies, Bitcoin is known to be a new tradeable financial asset. Not only to the world but to the governments running nations are also having a hard time understanding this concept and regulating laws around it. There is scope for money laundering and initiating payment for illegal activities without any trace using Bitcoins. That is why governments around the world are trying to regulate and control it by formulating laws around it that immensely impact the market sentiments and fluctuates the prices drastically.
- Competition
Though Bitcoin is the most dominating cryptocurrency as of now, it has some serious competitors approaching it. In 2017 Bitcoin had almost 80% of the market capitalization, but it fell to 50% by 2021. Major reasons were alternative coins like Ethereum, Ripple, Cardano, etc. These coins have significantly stolen the market capitalization from Bitcoin, but they still have a long way to overtake Bitcoin. It still dominates the market.
Final Thoughts
The presence of Gold or Traditional fiat money to humanity is age-old, and they have a huge trust factor attached with it, but the recent developments in the Cryptocurrency world, especially Bitcoin has posed a threat to them. The pace at which it has gained popularity and investment is something that no one ever imagined.
When it comes to Bitcoin, the digital cryptocurrency has been in the market for only a short period. We are still developing and understanding the concept deeply and regulations are being formed around it. The Governments, financial institutions, and Investors need to work together, keeping in mind and mending all the factors that lead to this volatility until we reach a more stable and sustainable coin.
The volatility is high, which sometimes leads to investors losing their money because they trade and invest on unsecured, slow, and complex platforms. One needs to use investment platforms, a secure and trustworthy platform for Bitcoin trading or investment.
