Why Bitcoin’s Price Is so Volatile
In 2017, the value of Bitcoin soared from $ 1,000 to just under $ 20,000, and by the end of the year fell to about $ 13,000. Since then, its value has grown and fallen sporadically day by day, pulling smaller cryptocurrencies like Ether and Ripple with it.
If you’re new to cryptocurrency, this volatility can be dizzying (and painful if you invest at the wrong time), but if you take a closer look, it makes sense. This is why the price of Bitcoin continues to fluctuate so dramatically and why it may become more stable in the future.
Bitcoin is still very new
Bitcoin was first released in 2009, but only really gained massive popularity in 2017. The technology is still extremely new and misunderstood, and this is a large part of why its value is so difficult to quantify.
Add to that the fact that most of the world’s bitcoins are owned by a tiny group of people. According to one report , as of the end of 2017, about 95 percent of the cryptocurrency was owned by just over four percent of the people who own bitcoin. This means that one person can decide to release a huge amount of bitcoins to the market at any time, completely changing its value.
Bitcoin price could also change dramatically as countries and financial institutions adapt to the idea of a cryptocurrency. For example, when one of the largest banks in South Korea tried out this technology, it caused a sharp jump in value . On the other hand, when China announced plans to suppress sketchy initial coin offerings (ICOs), Bitcoin’s value plummeted, and the same thing happened when a South Korean government official said the country could ban cryptocurrencies altogether .
Bitcoin is different from anything that came before it
Bitcoin does not really look like anything else through blokcheyn technology, which it supports . It is also handled differently than other types of currencies and commodities because we are still not sure what it is for. This leads to great instability.
The original idea for Bitcoin was a simple version of money that could be sent to anyone around the world: cash in exchange for the Internet. However, due to the fact that Bitcoin’s value has skyrocketed, and since it takes a ton of computing power ( and electricity ) to process each transaction, it doesn’t actually perform well as a form of spendable money. This creates uncertainty that leads to rapid changes in its value.
Unlike other types of investments like stocks or gold, bitcoin trading never stops. There are no market hours. Instead, you get 24/7 trading, which means even greater fluctuations in the value of bitcoins and less stability from day to day.
How Bitcoin Can Become More Stable
It is best if Bitcoin becomes more popular and more people buy it, and these types of value changes decline for two main reasons. Firstly, individual owners have less power over the price of bitcoins, and secondly, it creates stability as more people have a stake in the cryptocurrency.
Another possibility is that government regulation can help stabilize Bitcoin. In the short term, this could lead to a sharp drop in its value (as, for example, what happened in China and South Korea), but in the future it could help calm speculation and crowd out the dubious bitcoin businesses that are threatening to collapse. the whole concept of cryptocurrencies.