Have you ever wondered why cryptocurrency fluctuates so much? A lot of it has to do with the uncertainty of Bitcoin Unique as viable form of the currency or store of the value. Understand how this market currently works and all the unethical trading practices exchanged, and you will know why the price seems to fluctuate that much!
Even though cryptocurrency traders are accustomed to such volatility, it has also led to a number of market sceptics who believe that Bitcoin is nothing more than a speculative investment. But, still, there are some public figures, who have come out to voice their opinion on cryptocurrency and showing a trend moving towards positive sentiment.
But the question still remains out in the open. Why do you think cryptocurrency is so volatile, when compared to other forms of trading markets? Well, the answer is listed below. So, make sure to read till the end of the article.
Influenced by the supply and demand chain:
Supply and demand chain will influence the prices of maximum commodities more than any other factor. The market value of cryptocurrency, especially Bitcoin is affected by the number of coins in circulation and how much people are planning to pay for the same.
- By the design, cryptocurrency is only limited to 21 million coins. If the circulation gets closer to the limit, the prices are highly to climb in.
- It is really very difficult to predict what’s going to happen in the future when the limit is reached. There won’t be any profit to mine from it.
- As the bigger financial players tend to compete for ownership, the price of cryptocurrency is likely to fluctuate in response to those actions taken.
The factors that determine the price of cryptocurrency:
It is a well-known fact that Bitcoin is not issued by the central bank or backed up the government. So, the monetary policy tools, economic growth measurements and the inflation rates that mostly influence a currency value will have nothing to do with Bitcoin or any other cryptocurrency. Bitcoin mostly acts as a commodity being used for storing value. So, there are some other factors to determine its price range.
- The rate is determined by the current cryptocurrency news and the information presented by media.
- It will also focus on the regulations, governing the sales and use of Bitcoins in the market.
- It will also focus on the number of the competing cryptocurrencies available in the market at present.
- The final price gets influenced by the production cost of Bitcoin through proper mining procedures.
- Even the supply of Bitcoin and other cryptocurrencies and the market’s demand will determine the fair price point.
If you want to know more about Bitcoin and how the values seem to fluctuate from one year to the next, make sure to visit bitcoin-code.it once in a while. It will help you to determine if cryptocurrency is the ultimate trading platform you want to invest in.
Is the volatility good or bad for the Bitcoin world?
It is true that Bitcoin is gaining popularity as a form of money worldwide. But at the moment, traders and investors mostly use Bitcoin to benefit from any predictable price fluctuations existent in the market.
- These traders are mainly a group of people who never questions the volatility of cryptocurrency at all.
- It is because the volatile is the one that drives profits for these traders. They are always taking advantage of this fluctuation in price to turn a profitable deal.
- Few years back, around 2018-2019, the Bitcoin price moved to an average of 2.67% every day.
- During that time, traders took advantage of daily price swings, which were as high as 16% on upside and over 18% on the downside.
- This volatility was over 6 times higher than that of fiat and gold currencies.
- Investors, who actually steadfast in trading strategy can always take advantage of such fear and uncertainty as they know how to purchase Bitcoins and sell the same to profit from the price fluctuations.
- The daily swings of 10% in the cryptocurrency volatility stroke fear among many people and that appeared to be potential profits for all the wisest traders out there.
So, it’s true that cryptocurrency market is known for its volatility and there are reasons for that. But, in the end, you must know how to make profit out of it.