5 Reasons Why Bitcoin’s Price Is So Volatile
The market of cryptocurrencies is growing rapidly in recent years, especially when it comes to leading units like BTC, Litecoin, ETH, and more. Many features make them so attractive to investors, such as security, great potential, convenience, and volatility. While most of these features are technical, volatility represents the main reason for such popularity among investors. This characteristic is creating a chance for them to make a profit by investing in Bitcoin at the right moment. However, you have to know that various factors can influence its price.
If you want to learn more about fluctuation and how to earn by investing in BTC, visit bitcoincompass.io. Furthermore, this feature is related to different trading units available on the market, and you can become much more successful with your trades if you manage to predict the potential volatility of various trading assets. Here are some of the main reasons why Bitcoin’s price is so volatile.
1. Supply and Demand
Since this market is getting more popular, especially when it comes to Bitcoin, the levels of supply and demand are rapidly changing, and it is significantly changing the value more often. The best example is related to the moment when this asset reached a value of over $19,000 a few years ago, which influenced in huge popularity.
However, after that moment, more people became interested in selling their crypto, which affected the price to fall. Still, the market was not as stable as it is today when BTC manages to hold a price of over $50,000 for a few months already without significant changes. On the other hand, the main reason for that is because large investors became a part of this market as well. Therefore, their actions could further change the value.
Even though predictions and analyses have nothing to do with any technical features, trading markets find them very important. Still, you have to know that there are numerous charts and statistics available today, along with the predictions of many people. Therefore, you should only rely on those studies provided by financial experts with a lot of experience in this branch. On the other hand, making accurate predictions is difficult since there are too many factors that can influence the price changes.
A common mistake of traders with a lack of experience is that they would rely on some prediction too much, which includes investing a lot of money or selling the Bitcoin at the moment when it can become even more valuable. According to recent analyses, the price will most likely continue to rise, and some experts are suggesting that the value will grow over $100,000 in the next few years.
3. Laws and Regulations
When we look at some recent trends it seems like most countries will find a way to implement cryptocurrencies as part of the standard monetary system. However, they will have to find a proper way to charge taxes for transactions made with e-wallets. When it comes to the United States, they introduced a regulation where Bitcoin is considered as property, which means that you will have to pay an additional tax after you sell it or buy anything with it. Global acceptance and modern regulations will positively affect the price as well. On the other hand, in case that some big economy decides to make BTC illegal, that will affect the fall in value. However, chances for that are very low, especially when it comes to large economies.
4. Large Investors
While there are many benefits for stability when large investors decide to buy Bitcoin, there are also some risks. The same feature can be seen in every market, where big investors could create a monopoly over it, and pump the values even more. That can influence the rise in values. However, their actions can be very important for the whole market. For example, if some of them suddenly decide to sell their digital assets, it can affect an insignificant fall in value.
5. Issues with Stability of the Market
As we already mentioned, many factors can influence in lack of stability of this market. That is bringing increased risks for investors since the future is uncertain when we have so many influences from different aspects. Many indications suggest how Bitcoin will continue to rise. We already have ATMs with crypto support all over the world, Also, many countries are preparing or already have taxation laws that create a space for legal transactions.
However, this market is still new, and while there is a great chance to make a profit, that is still a short-term feature. Many people believe how this cryptocurrency represents a future for the whole world and the global economy. Still, there is always a chance for some critical changes, issues with cyber-security, the appearance of new units that might be even more attractive to investors, and much more.
The Bottom Line
If you are interested in investing and trading with cryptocurrencies, it is essential to learn more about their main features, what is creating and influencing their price, and what predictions are saying for their potential. According to many indications, Bitcoin will most likely become even more valuable over time. However, you should never take those predictions for granted. When it comes to investing, you should avoid spending more than you can afford to lose, which is the main feature of successful traders with all sorts of assets today.
On the other side, buying this digital asset might be an excellent way to protect your funds from inflation and depreciation. Besides that, there is a chance that the world will face another recession caused by the pandemic, and investing in the crypto market can help you to avoid significant losses if the crisis occurs. One of the main reasons for creating this currency was to offer an advanced model of the financial system, which was made during the previous crisis in 2009. Besides Bitcoin, there are many other options with great potential, and you should combine different ones to increase your chances for a profit even more.