What makes bitcoin so volatile?

Traders are always concerned about the “volatility of Bitcoin”. You may know what makes the value of this digital currency highly volatile. Like many other things, the value of Bitcoin depends on the rules of supply and demand. If the demand for “Bitcoin” increases, the price will also increase. On the contrary, the decline in demand for Bitcoin will lead to a decline in demand. In simple words, the price is determined by the amount agreed to pay the commercial market. If a large number of people want to buy Bitcoin, the price will go up. If more people want to sell Bitcoin, the price will go down.

It is worth noting that the value of Bitcoin can be volatile when compared to the currencies of more established commodities. This fact can be attributed to its relatively small market size, which means that a smaller amount can change the price of “Bitcoin” more significantly. This mismatch will naturally decrease over time as the currency develops և the size of the market increases.

After mocking the end of 2016, “Bitcoin” reached a new record high in the first week of this year. There can be several factors that can lead to Bitcoin instability. Some of them are discussed here.

Bad press factor

Bitcoin users are generally afraid of various news events, including announcements by government officials and geopolitical events that Bitcoin may be regulated. This means that the bitcoin acceptance rate is concerned with negative or bad press releases. Various bad news have frightened investors and banned them from investing in this digital currency. An example of a bad headline is the apparent use of Bitcoin in the development of drug transactions through Silk Road, which ended in October 2013 with the termination of the FBI market. These kinds of stories caused panic among the people, they caused Bitcoin. the cost will be significantly reduced. On the other hand, trade veterans viewed such negative incidents as evidence of the maturity of the Bitcoin industry. Thus, “Bitcoin” began to gain its value immediately after the disappearance of the influence of bad media.

Perceived value fluctuations

Another major reason for the volatility of the value of “Bitcoin” is the fluctuation of the perceived value of “Bitcoin”. You may know that this digital currency has properties similar to gold. This is guided by the design decision of the creators of the main technology to limit its production to a static amount of 21 million BTC. Due to this factor, investors can allocate more or less assets to Bitcoin.

News about security breaches

Various news agencies – digital media – play an important role in shaping a negative or positive public concept. If you see something profitable, you will probably go for it without paying too much attention to the negative aspects. There have been reports of Bitcoin security breaches, and it has really made investors think twice before investing their earnings in Bitcoin trading. They become very sensitive when it comes to choosing a specific Bitcoin investment platform. Bitcoin can become unstable when the Bitcoin community detects security vulnerabilities in an attempt to generate a large open source response in the form of security patches. Such security concerns give rise to some open source software, such as Linux. Therefore, it is advisable for Bitcoin developers to expose security vulnerabilities to the general public in order to provide robust solutions.

The latest OpenSSL vulnerabilities that were attacked by the Heartbleed bug, said Neil Mehta (a member of Google’s security team) on April 1, 2014, seem to have had some declining impact on the value of Bitcoin. According to some reports, the value of “Bitcoin” fell by up to 10% against the US dollar next month.

Small Option Value for Owners of Large Bitcoin Proportions

The volatility of Bitcoin also depends on the holders of Bitcoin, who have large proportions of this digital currency. It is not clear to Bitcoin investors (with current reserves in excess of $ 10 million) how they will adjust their position, which is expanding to a fiat position, without moving the market sharply. Thus, Bitcoin has not touched on large market acceptance rates, which could give the option value to large Bitcoin owners.

The impact of Mount Goks

The recent high-level losses of Mt Gox are another great cause of Bitcoin instability. All these losses և The news of the heavy losses resulting from it had a double effect on the instability. What you may not know is that it reduced the overall Bitcoin flame by almost 5%. This created a potential increase in the residual value of Bitcoin due to the growing scarcity. However, the replacement of this rise was the negative result of the following series of rumors. In particular, many other Bitcoin gateways viewed the great failure of Mount Goks as optimistic about Bitcoin’s long-term prospects.

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