What Is the Reason Behind Bitcoin’s Volatile Nature?

No government authority is involved in Bitcoin regulating the bitcoin prices. We are running out of the supply of Bitcoin. Shortly, the prices will regularly hike. Bitcoin prices are currently down to more than 50% of their actual value or half of the all-time high prices. As the supply decreases, the demand for Bitcoin increases and the price volatility continues. One more reason for the volatile nature of Bitcoin is the hike shown by Bitcoin in September 2021. After the price hike, many new investors added in Bitcoin investment and started trading Bitcoin to make profits. If you are planning to trade Bitcoin, you must trade with a reliable trading platform like BITSOFTWARE360.COM

Many traditional investors have started investing in Bitcoin after the hike, and the pandemic has shifted many traditional and real estate investors into digital investments. As we all know, bitcoin is a highly volatile asset and has left Precious metals like gold behind. Shortly there are chances for bitcoin to become the legalized currency for exchange and can also give intense competition to the dollar in the international market.

The reason behind bitcoin’s volatile nature

Supply and demand

Bitcoin is not created; it is mined with the help of supercomputers, which are electricity-hungry. You can also start your mining process to earn real Bitcoin. It is a method used by some people to earn profit through Bitcoin. Bitcoin is fixed with a supply of 21 million, not more than can ever be minded by anyone or any source. It is one factor that affects the prices of Bitcoin and makes it volatile. 

It also depends on the investors how much they are willing to pay for any digital investment. Many other coins are competing with Bitcoin. These coins do not have the same fixed supply. So, the prices of other coins can stay the same as the Bitcoin prices. Thus, Making the Bitcoin price highly volatile.

News effect

 Any global news related to the supply of bitcoin or any other war-like situation can lead to a drop in bitcoin prices and a rise in bitcoin prices. This is because every media outlet needs some content to run their business, and they often print fake news about crypto based on expert advice without any evidence or written proof. It happens because the government is not keen on bitcoin and other digital currencies. 

There are some situations that investors create on their own. For example, a person who has invested a considerable amount in bitcoin will always say that the price of bitcoin will rise shortly. On the other hand, an investor who has just started the crypto investment and beard loss and wants to get off the bitcoin investment will say that it is the worst investment ever seen. 

As the media announced the news about the launch of the ETF bitcoin strategy (Exchange Traded Funds) in October 2021, bitcoin prices skyrocketed in a few weeks filling the investors with profits. Later, after the hike died and the people came to know that the ETF is linked to future contracts of commodities markets, the prices returned to the same position.

Bitcoin regulation

The absence of any central authority in bitcoin and free from any rules and regulations significantly impact bitcoin prices for the short and long term. In addition, it also assumes that if you are in the mining business with bitcoin, you have to show the mining profits as an income based on the coin’s market and the value on the day you receive it. Therefore, regulating bitcoin is considered the best one of the things that can be done in the cryptosystem. But it will decrease the number of profits people can make out of it.

Conclusion

Here are some of the reasons that support the volatile nature of bitcoin. Some investors and traders see the volatile nature as a profit-making opportunity, while others see it as a red flag for their investments. Due to bitcoin’s volatile nature, it has benefited many investors and wiped out many investors’ wallets. Although bitcoin investments are hazardous, investing with full knowledge of wallets and other features of bitcoin can help gain maximum profits.

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