If you are a Bitcoin network, you often have noticed the volatile nature of Bitcoins. Several people hesitate to invest in Bitcoin for the given reason. Investing in Bitcoins is very risky, but you need the patience and will to profit. However, various scammers discourage investors from investing in Bitcoins. If you want to trade in Bitcoins the right way, you must take note of the volatility nature of Bitcoin.
Bitcoins are rapidly growing and experiencing a huge number of people that trade them. Before trading in Bitcoins, there are certain disadvantages of Bitcoins that you need to be aware of. Just like all financial decisions, the more you know, the better transaction you can make. However, knowing the various factors that make Bitcoins so volatile will ensure you make better investments. With a smarter investment plan, you can achieve a higher profit. Log onto Bitcoin Era to avail of a very easy and seamless transaction process.
Factors That Determine The Volatile Nature of Bitcoins
When Satoshi Nakamoto created Bitcoin, he set the limit of bitcoins to 21 million that can ever exist. Hence, its scarcity is what makes Bitcoin so valuable, but it also makes them volatile. Other factors that determine the volatility of Bitcoin are uncertainty of the future and headline-making news.
Here are a few factors that you should know that influence the volatile nature of Bitcoins.
- The market is still new and upcoming
The cryptocurrency market is a baby; however, it is rapidly gaining popularity. Although, with the rise in popularity, several investors feel discontent about investing in this currency. Even with all the attention from the media, the crypto market is tiny compared to traditional currencies. This resulted in increasing the market price value of Bitcoins. These people, in turn, can influence the market however they please. Moreover, if they decide to sell a tiny portion of Bitcoins they own, it can crash the market.
- The massive speculations
The cryptocurrency market is full of speculative investors. They predict whether the prices of a particular coin will rise or drop to tune investments into profits. However, the investments from these speculative investors can cause a sudden influx or outgo of money. At times, this leads to the volatility of Bitcoins.
Cryptocurrencies such as Bitcoins are virtual assets and have no physical backing from any currency or commodity. This means the price of Bitcoins is dead set on the laws of demand and supply. Without the proper backing from governments and any other stabilizing factor, several reasons could influence the supply of the coin. Hence, increasing its volatile nature.
- The evolving technology
Blockchain, peer-to-peer, and other similar technologies are very new to the world. , and the technologies will evolve and have more uses than just cryptocurrency as we head into the future. Hence, currently, there is a problem with scarcity and scalability.
However, it is important to note that it has only been a decade since bitcoin was popular. The future of cryptocurrency is bright and blooming, but currently, with the limitations of the current technology, it is volatile.
- Lack of big-time investors
As the crypto market is new and striving to enter the main spotlight market, serious investors lack. Most people who invest in crypto are investing in them in a part-time manner, and therefore, they will leave the market if they are unable to make a profit.
Moreover, big investors who cash in their money towards Bitcoin tend to take higher risks. This action will enable overall growth in the market, making it more stable. However, it is understandable if part-time investors do not take more risks as they are afraid of losing their investments. Thus, this lack of serious investors can cause an increase in the volatile nature of Bitcoins.
Final Words
So, finally, at the end of the day, these were some of the most crucial aspects that determine the volatile nature of Bitcoin. You should always be aware of these factors before investing in Bitcoin. However, investing in bitcoin right now is a good idea as you can cash in on the volatility. So, keep this point in mind before investing!