Bitcoin was made publicly available back in 2009, and it started rising in popularity a year after that as the price for a token went from a fraction of a dollar to around $0.09. After that, the price has risen by thousands of dollars – sometimes even fallen by thousands of dollars within a few days.
Now, there are a couple of reasons why bitcoin has become synonymous with volatility. The leading platforms like Immediate Profit believe that understanding those factors can be helpful when making investment or trading decisions. So, read on to know more about those factors.
Supply and demand factors
Demand and supply influence the price of most commodities even more than other factors. The market value of bitcoin is mainly affected by the number of coins in circulation and the amount people are ready to pay. The closer bitcoin circulating supply reaches to the limit of 21 million coins, the higher the prices are going to go.
It’s hard to predict what can happen to the prices after the limit is hit – there won’t be any more profits from bitcoin mining. With major financial players competing for ownership in the situation of reduced supply, the price of bitcoin is going to fluctuate for all actions they undertake.
Actions of investors
Limited supplies make bitcoin demand increase. Wealthier, long-term investors tend to hold bitcoins to prevent the ones with less assets from getting exposure. These investors also drive bitcoin volatility.
It isn’t clear how the bitcoin investors with millions of bitcoin holdings liquidate their major positions in fiat currency minus any impact on the market price of the bitcoin. When the big investors suddenly start selling the bitcoin holdings, prices are going to plummet because other investors begin panicking.
News about bitcoin
As media and news outlets need content for their subscribers, they need predictions and information from so-called experts, who simply give out opinions without any proof.
You would hear major bitcoin investors saying that the currency is going to be worth thousands. Others opine that the new altcoins are going to eat into bitcoin’s market share. Such media attention influences bitcoin prices to benefit the ones holding a huge number of cryptocurrencies.
Bitcoin continues to grow
Both gold and fiat currency have been around for the longest time. Though exchange rates fluctuate between countries and remain a bit volatile, the values tend to be predictable to a point depending on the economic situations it faces and the issuing country.
On the other hand, bitcoin is still pretty new in the market. It’s still in the phase of price discovery. It means bitcoin prices are going to change as governments, users, and investors move past the initial growth pains until the prices stabilize.
The endnote
You can open and watch any random crypto news, and you’ll see there is some fan or investor speaking of how high the price of bitcoins is going to reach. In reality, it’s not known how low or high the crypto prices can go. Thus, it helps to rely on a reputed trading platform to understand and predict market volatility better.