Why Is Bitcoin So Volatile?

Bitcoin is one of the utmost popular and sizzling aspects of the mainstream marketplace.

11:43 11 October 2021

Bitcoin has a massive store value in contrast to other cryptocurrencies. The fact might stun you that bitcoin's store value nears $50000 and the value of the second-leading cryptocurrency, ether nears only $3500.

 

There is a drastic shift in the store value of first and second-leading cryptocurrencies. The core notion of cryptocurrencies was present way before the invention of bitcoin. However, Satoshi Nakamoto was the first-ever inventor to bring this fascinating concept to existence. Bitcoin is a politically independent cryptocurrency which means bitcoin does not confer the rules of federal banks and national financial authorities.

 

Bitcoin is exceedingly volatile, and this is one of the prominent reasons why bitcoin trading is so profitable. There are websites like yuanpaygroup which can help you in getting profitable results in your bitcoin trading venture. Everyone is familiar with the fact that bitcoin's store value is very volatile. However, no one is familiar with the reasons behind the volatility of bitcoin. Below are some of the important reasons behind the volatility of bitcoin. So without wasting any further ado, let's jump straight to the facts.

 

Is bitcoin completely politically independent?

 

Bitcoin was the first-ever cryptocurrency. The only reason why Satoshi Nakamoto invented bitcoin was the flaws of the traditional banking system. However, Bitcoin was the only currency to develop a fully peer-to-peer network and blockchain.

 

The complete peer-to-peer network of bitcoin assists bitcoin in operating without the involvement and reliance on the traditional banking system. Bitcoin mining is the process that adds new bitcoin to circulation. All the more, blockchain is a database that broadcasts bitcoin's transaction information on it. These technologies demonstrate that bitcoin is entirely politically independent.

 

Reasons behind Volatility!

 

Everyone is familiar with the fact that bitcoin is a highly volatile currency. Moreover, several economists have criticized bitcoin for its volatile nature. However, the undeniably volatile bitcoin is a blessing for bitcoin traders and investors as these people are making a massive amount of money through bitcoin investment and trading progression.

 

However, the volatile nature of bitcoin's store value has concerned many financial authorities. As a result, few countries are forming new and stringent crypto regulations regarding bitcoin. All the more, countries like China have banned bitcoin due to its volatile nature.

 

According to some sources, the volatile nature of bitcoin is affecting the stability of a country's economy. China also announced a cryptocurrency crackdown due to the volatile nature of bitcoin and other currencies. Here are some of the prominent reasons behind the volatility of bitcoin.

 

Decentralization

 

Since bitcoin is utterly politically independent, the market value of bitcoin is susceptible. There are no government authorities and renowned organizations which stable the market value of bitcoin. All the more, no government authorities can destroy bitcoin units to stabilize their store value. Due to bitcoin's decentralization, several other factors also affect the value of bitcoin and cause volatility.

 

Bad News

 

Since bitcoin comes up with a decentralization aspect, factors like terrible news also affect the store value of bitcoin. Bad news regarding bitcoin motivates investors and traders to extract their funds out of bitcoin.

 

The bad news includes cryptocurrency trustable exchange bankruptcy, a known face degrading bitcoin, and many. Everyone is familiar that Elon musk has been active in the bitcoin business for a very long time. Recently Elon Musk announced the suspension of bitcoin as a payment method in the tesla motors, which affected the store value to an exceeding extent.

 

Crypto Regulation

 

Crypto regulation is correspondingly one of the prominent reasons behind the volatile nature of bitcoin. Crypto regulations include new flanged strict rules of any country regarding cryptocurrency. For example, recently, China announced a cryptocurrency crackdown. The news of the cryptocurrency crackdown in China led to a market crash. And it decreased the store value of bitcoin and other cryptocurrencies to an exceeding extent.

 

Supply and Demand

 

Since bitcoin is politically independent, no government authorities are intervening in creating new bitcoin units. Therefore, the noninvolvement of government authorities is one of the prominent reasons why the supply of bitcoin is so volatile. Volatile supply leads to volatile demand, and volatile demand leads to a volatile price point.

 

These are some of the reasons behind the volatile nature of bitcoin.