Why is bitcoin volatile?

Why Is Bitcoin Volatile

No doubt bitcoin is a risky investment because

of its volatility in the market. Since bitcoins inception in the early days,its value has been spiking and falling from day to day along with other virtualcurrencies ethereum, litecoin. But for new investors, this volatility in thevalue can be dangerous. There is plenty of reason that is responsible for this instabilityin cryptocurrency market that one needs to consider before they startinvesting. Some of the major reasons are.

Bitcoins are limited:

Bitcoin runs on Blockchain and they are

available infinite number that means as the number of bitcoin investor’sincreases demand for more bitcoins will also increase while increasing thebitcoin price simultaneously. On the other hand, one cannot easily mine morebitcoin to meet the rising demand which means there is no way one can make thiscurrency stable.

Holds No real value:

Bitcoin is a virtual currency and its value

entirely depends on its users, without any central authority regulating it. Incase other cryptocurrency plugged in and gained success, bitcoin price willsurely get affected adversely

Bitcoin, unlike other assets, doesn’t hold any

appropriate valuation. Though investors in Blockchain can keep an eye on itsdaily transaction volume and processing speed this isn’t enough to understandbitcoin ability to survive and flourish for a longer period in the rapidlychanging market.

New regulation around

the globe:

Bitcoin volatility is also driven by different

legislation forced on cryptocurrencies in different countries. We havecountries like Japan that have accepted and regulated bitcoin trading as anyother legal tender, and there are some like China who has banned it completely.However, these regulations are in the early stages allowing market manipulationand increasing volatility issue simultaneously.

Wrapping up:

Other factors responsible for the price swing of

cryptocurrencies and volatility can be tax treatment on bitcoin and other suchnews and rumours, hacks and security breaches. This is why it failed to gaininvestors faith for its mass adoption as an alternative currency. So to make aneducated decision while investing in bitcoin one need to understand what areyou getting into? Else coin is the significant cryptocurrency exchange in South Africa that helps you stay tunedwith the all the updates and bitcoin price in South Africa..

But with time we expect to have more rules and

regulations to regulate the currency, more investors and a clearer outlook inthis market which is assumed to decrease the volatility of bitcoin to thelarger extent.