Cryptocurrency is itself intrinsically volatile. This applies to all cryptocurrencies including bitcoin. Bitcoin is so volatile that its price range fluctuates every one minute. No, it is not an exaggeration to say so. People who invest in cryptocurrencies or bitcoin usually tune into the live updates or information about the price fluctuations of it to take appropriate steps immediately. To people who are new, it is difficult to catch up with the pace of fluctuations that bitcoin witnesses. Even to people who are experienced, it is impossible to track the price fluctuation without live information.
That brings you to the question of why bitcoin is so volatile and why does its price fluctuate so frequently? There is no one straightforward answer to this. While some people and even experts give one mind boggling answer to this question, there are certain factors, when you look deep into it, that influence the price of bitcoin. If you are unaware of those, this article is a perfect guide that you have been searching for on the internet for a while.
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Why does bitcoin fluctuate?
Supply and demand
The volatility of any currency is inevitably intertwined with the supply and demand present in the market. The same case applies to cryptocurrencies including bitcoin. The bitcoin supply is currently limited, while the supply has been consistently and unprecedentedly increasing without any signs of slowing down anytime in the future. Any mismatch in the supply and demand graph is bound to show its impact on the price volatility.
The more the gap or mismatch, the more volatile bitcoin prices are bound to fluctuate. The gap is widening day by day. Rest you can infer from the case laid.
Bitcoin is not a regulated digital currency. While some nations have openly adopted it, a few others have banned it. While some others are not sure about its status, citizens of these nations are not demotivated by any factors to not invest in it. The prime reason is a lack of regulatory mechanism and authority in place to overlook the price changes. It is causing a drastic change in the price range of bitcoin.
Lack of appropriate regulation means there is no one or organization to moderate the price falls and rises, which causes the uncontrolled behavior of the price and cost of these currencies.
Bitcoin is always in the news for one reason or another. While its volatility majorly occupies the news headlines, there are other reasons too for bitcoin to make it to the front page. For example, celebrities and public figures like Elon Musk are always vocal about the happenings in the crypto industry. Their proactive behavior and performance is one thing that hypes up the cryptocurrency and bitcoin.
Predictions and price changes are another reason why bitcoin is always in news. Anything that occupies news always intrigues the audience, investors, and traders. This is another good reason why bitcoin is volatile and fluctuates frequently.
Even the most experienced investors do not know the history of bitcoin. While a lot of people assume that bitcoin is the oldest of all cryptocurrencies, that is not at all the case. It is not the youngest either but it surely is in its infant stage. It is new in terms of growth and popularity as well. Hence, this is one reason why more and more people are flocking towards bitcoin day by day.
Something that is new is always bound to attack more crowds. The same is currently happening with bitcoin. As more people are investing in it, the supply-demand mismatch has been growing to make the price fluctuate.
Bitcoin is quite popular in the crypto market. It is quite evident if you follow or track the news for at least a couple of days. You will see that the majority of the news is occupied with bitcoin news alone.
Even on social media and all digital media platforms, bitcoin is the dominant topic of discussion. It is quite evident that social proof makes more people flock towards popularity. This also widens the demand-supply mismatch, which in turn has a fluctuating effect on the price of bitcoin.
This factor doesn’t just influence bitcoin but everything. Although the exact reasons for media hype is not clearly known yet, one thing is clear that media hype surely has an influence on the investing mindsets of the audience or the people performing in the industry. Bitcoin is currently the most hyped digital currency among all the other digital currencies from the crypto landscape.
This in turn creates a ripple effect on the price of bitcoin, which causes it to fluctuate in an uncontrolled manner. This uncontrolled nature is not seemingly going anyway soon. Hence, you can expect fluctuations in the near future too.
After all that has been said and done, bitcoin is still difficult to track and extremely volatile in nature. A small incident or happening at some corner of the world has a ripple effect on the price of bitcoin. This may help you picture or comprehend the gravity of the issue. That doesn’t mean you should stop bothering about the volatility and fluctuations altogether.
It should motivate you to dig deeper. And the basic knowledge that has been discussed above is the minimum you can do to avoid losing your money due to a lack of prior and appropriate knowledge. Yet remember that there are other factors that influence the price range. With time, however, you will get better and learn the depth but not completely ever.