For everyone who has some knowledge of cryptocurrencies, the volatility of the famous Bitcoin is more than obvious. Even so, it is common that not everyone is familiar with the subject, so if you are one of those people who is interested in investing in Bitcoin, but you do not know the reason for such volatility, then you are in the right place.
In this section We will briefly explain the reasons why Bitcoin has a price that fluctuates volatilely. Of course, keep in mind that the luck of Bitcoin is the same as that of many digital currencies that are on the market as a general rule, therefore, it is common to see that, if the BTC goes down or up, the others do too.
Why is Bitcoin so volatile?
1. The lack of regulation as one of its causes.
There is a basic concept in the world of cryptography that talks about the decentralization of Bitcoin and the fact that it is a digital currency that is not regulated under any government entity; This means that there is no one who can regulate the value it has, nor can they do anything to control its falls or rises.
Then, this decentralization and lack of control is one of the main reasons why its price is so volatile. However, this little or no regulation is the main attraction why investors see it as a very attractive electronic currency and, if regulations were to appear, this interest could diminish, therefore it is a difficult factor to remedy.
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2. The magic of supply and demand makes BTC volatile.
In case you don’t know, Bitcoin was created with a capped supplylimited by an amount determined by its developers, this amount is 21 million tokens, but, considering its popularity, its price is highly influenced by the law of supply and demand.
That is, having a limited number of tokens and receiving so much demand, its price begins to rise due to the shortage of tokens. Conversely, if for some reason big investors start selling their bitcoins and flood the market with them, then its price will begin to decrease.
This supply and demand driven volatility has its advantages and disadvantages. On the one hand, there is a great possibility that, out of nowhere, its price will fall precipitously, but it will also have the same possibility that its value will skyrocket, so, despite being one of the riskiest investments you can make, many people still see her as one of the most interesting market opportunities to invest your money.
In any case, for many people this price volatility does not imply a real danger, especially if they already have experience in the area and know how to determine the behavior of cryptocurrencies.
3. It is a still evolving technology.
Bitcoin and cryptocurrency technology are still considered to be a very young investment platform, as barely a decade since its releaseHence, not everyone knows their concepts or has confidence in them, this prevents them from being able to remain stable in any situation.
Such is the case of influential people in the world who, just by speaking wonders or, on the contrary, criticizing these coins, make their price rise through the roof or plummet to the ground respectively. It must take a long time, trial and error processes for bitcoin to have a price that resists the onslaught of external factors.
4. World conflicts.
This goes hand in hand with the law, supply and demand, and the actions taken by whales or large investors, since every time the world or global economic outlook is affected by a temporary event such as the covid-19 pandemic. , crises such as that of containers or wars, sanctions and inflation in powerful countries, makes investors alert.
So, realizing this, they decide that it is better to transfer their capital to safer and less volatile investments. Hence they sell their bitcoins, saturating the market and causing its price to fall. On the contrary, if everything begins to stabilize, they seek to resume these high-risk investments, they buy bitcoin and as demand increases, the value of the currency rises.
