Why Is Bitcoin Highly Volatile?

by George Philip
Published: Last Updated on 0 comment

As more and more people are getting curious about digital currencies, bitcoin’s market cap is rising rapidly. Developers discovered Bitcoin in 2009, but at that time, people were not likely to be aware of these virtual cryptocurrencies. This virtual token, BTC, has dramatically grown in this field in the last few years. The market of a bitcoin is in thousands of dollars, which leads to making it the most expensive cryptocurrency in contrast to other virtual tokens. Check out how Bitcoin influence the finance sector in Japan.

According to bitcoin maximalism, bitcoin is the only cryptocurrency available in the market and is needed by everyone shortly. Bitcoin is one of the top leading virtual tokens, which is helping in boosting the economy also. There are numerous investors present in the market which had made millions of dollars by investing in the initial stage of bitcoin. The primary reason for creating this massive profit by investing in bitcoin is volatility

As you know, that bitcoin is a highly volatile cryptographic asset. The value of bitcoin fluctuates every second or minute, and you can make money by buying and selling some at the right time. According to some experts, bitcoin is still in the developing stage, and the best is yet to come shortly. There is no neck-to-neck competition for bitcoin in terms of price in the entire crypto market.  

Key terms

The price or rate of bitcoin also depends on the market factor, demand and supply, just like other assets or products available.

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Media outlets and influencers also play an essential role in fluctuating the price of bitcoin and other assets. 

The quantity of BTC is limited, but the demand rises day by day. Therefore, it is the most critical cause of this high amount of volatility. 

Demand and supply

It is the foremost and most prominent factor that affects the price of every asset or product in the marketplace. The primary reason for high fluctuation depends on the number of available bitcoins in the market and the amount people are ready to pay to get one BTC. 

As you might know that not more than 21 million bitcoin can be mined or generated because it’s the maximum limit to generate BTC according to their design. By the time the supply of newly developed BTC is getting closed, the price of BTC is starting to rise. Therefore, it is impossible to guess the accurate result of reaching a limit in generating BTC. 

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The only thing which you should know is that mining will not remain profitable because there will be no coin to mine. So we can’t do anything more than waiting for the result, whether the price will show positive fluctuation or a negative slope. 

Bitcoin investor actions

As mentioned above, the supply of BTC is limited to 21 million bitcoins, but the demand for BTC is rising day to day. Investors who have enough money to hold bitcoins focus on long-term investment in this situation. In addition, according to some official reports, numerous brokers and financial institutions are trying to get some bitcoin-backed securities approved. So, investors also play their part in making bitcoin highly volatile. 

As you know, bitcoin whales (wealthier investors holding millions of BTC) will start to sell their BTC suddenly then the price of BTC will get highly affected. To prevent the high amount of fluctuation, many crypto exchanges have set limits on liquidating the BTCs. These exchanges’ most common limit value is approximately 50,000 US dollars. 

Those who have an ample amount of BTC will not be able to liquidate their BTCs immediately, and it will help prevent fluctuation in price. It is a fact that numerous people are using BTCs as a store of value and transfer of value because they believe that they will be able to maintain their weight in future. 

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Bitcoin news outlets 

If you have ever read the newspaper, it is impossible to say that you have never read about investors’ predictions regarding bitcoin. Generally, those predictors are investors who had already invested a large part of their money in bitcoin. One of the best examples of this factor is the bitcoin strategy ETF which the media announced in 2021. It leads to skyrocketing the price of BTC in the international market. At that time, the highest price touched by BTC was approximately 68,000 US dollars.    

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