Bitcoin was launched more than a decade ago, in 2009, by an anonymous group of people. No one knows the real developer of the digital currency, although an arbitrary noun has been aligned with its creator (or creators)- Satoshi Nakamoto.
Since its introduction to the commercial market, its popularity has been on the rise. However, its highly volatile nature creates a lot of perplexity for investors.
If you are also looking forward to investing your fiat money in cryptocurrency (Bitcoins), then this article is for you. By the end of this article, you will understand what makes the Bitcoins fluctuate so much.
Large Scale Dumping
If you’ve ever been trading stocks or foreign currencies, then this mustn’t be difficult for you to understand. When a stock or a currency is dumped in large quantities, its value is sure to take a dip. In a much similar way, when Bitcoin owners dump their coins in the market, its value takes a plunge. However, dumping should not be confused with selling bitcoins. Since selling can give a boost to its value. Simply because more sale is equivalent to more trading.
Black Market Effect
One of the most influential factors for Bitcoin’s volatility is its use in black market trades. Since it is easily tradable in the black market for sale and purchase of illegal services and products, this pulls off the investors from the market. Perhaps, this also attracts the governments to intervene in Bitcoin trading, posing tight regulations around it. Therefore, causing its price to fall drastically.
Availability of the Exchanges
Another factor that affects the rate of exchange for Bitcoins is the availability of an exchange. Typically, these exchanges operate in compliance with Bitcoin-Friendly Banks that regulate the trading and hold the assets. If you click here, you can come across a list of friendly banks that allow Bitcoin trading. It is needless to say, the number of exchanges only helps the investors understand the Bitcoins better. And this can help improve its trading. Therefore, an appreciation in its value.
Breach in Security
Although a virtual wallet is linked to a security key, techies and hackers can always find their way around. Over time, security breaches into the Bitcoin trading system, or precisely blockchain (the technology behind the bitcoin) and bitcoin mines have feared the investors. Since blockchain is an open-source P2P ledger for maintaining transaction records, it can be accessed by anyone. To sum it up, all this has negatively affected Bitcoin’s image and subsequently its value.
Stock Volume & Mining
The number of bills that are traded in the market decides the value of a currency. Similarly, the market volume of Bitcoin trading also affects its value. Unlike fiat currencies, Bitcoin’s value does not depend upon the volume in the stock, but the volume in trade. Simply put, the less the number of Bitcoins are held by a stockist, say a high profile investor, the higher its value rises. Stock volume and the mining volume both affect the Bitcoin’s value, collectively.
In the end, it’s about demand and supply. The higher the demand, the more the value.