Being one of the most popular and highly valued cryptocurrency Bitcoin is a widely traded currency across the Crypto world. But besides this popularity, Bitcoin is such a cryptocurrency that fluctuates a lot which means that its value keeps going up and down quite often and quite frequently. This can be a thing of concern for those investors who might look forward to investing in Bitcoins and this might even lead them to doubt their choice of going with it. But there are many factors that can answer why Bitcoin fluctuates a lot. This information can help people who wish to or look forward to investing in Bitcoin via https://bitqt-app.com/.
1. Due to supply and demand
Resources and goods that are not regulated by the government have to be dependent on the market for determining their value. This value is basically determined by the demand and supply of that resource in the market currently. Bitcoin is a similar form of currency whose value is not regulated by the government and whose value is dependent on the demand and supply of it. This is why there is a kind of fluctuation in the value of Bitcoins as the market supply and demand can change according to various factors inevitably affecting the currency’s value.
Supply and demand in terms of Bitcoin refers to the amount of coins currently in circulation and the willingness of people to use that currency for their transactions. Hence as there remain less and less coins to mine the value of the individual coin Rises.
2. Higher investments by anticipating investors
Another reason that can lead to a rise in the price of bitcoins are the investments made using it. This means that as there is a hoarding of a large number of Bitcoins in the hands of certain investors that are waiting for its prices to go up before selling them to earn higher profits, there is a simultaneous less flow of Bitcoin in the Crypto market.
This lack of supply that is created by the investors has led to the wealthier investors having a high amount of Bitcoin reserves with them whereas the other small traders do not have much access. In case some of these investors suddenly decide to sell a large portion of the Bitcoins they hold, the value of this currency might suddenly fall as other competitive investors might also want to sell their coins, that too at lower prices.
This is why there have been provisions created to limit the amount of bitcoins that can be liquidated by an investor in a single day. This can help in keeping a check on the value of such coins.
3.The impact of media and influencers
Media has a huge impact on the kind of decisions people make and subsequently the value of cryptocurrencies like Bitcoin. There can be instances where the media might have posted something positive about the future of Bitcoin which might then have prompted people to buy it in larger amounts. This sudden high demand of cryptocurrency created by the media can then lead to the increase in its price. Even influencers who have a huge following can be the reason for such a fluctuation. One of the most memorable examples of this are the tweets by Elon Musk. As he is not merely an influencer but also one of the best businessmen of today, his words and tweets hold a lot of value especially for the other investors.
Once such a news or tweet is forgotten about by the people the value of that particular currency often switches back to its normal value.
4. Regulations by countries
Although a country alone cannot shut down the whole Institution of cryptocurrency, they can still place certain regulations on the functioning and trading of cryptocurrency within their country. If the regulations put up by a country are very strict and are against cryptocurrency then that can ruin the Bitcoin market in that particular country. This can then affect all different accounts which were connected with that particular country via Bitcoin trading. When Bitcoin mining was banned in China the value of Bitcoin fell as the people who mind the cryptocurrency in China could not relocate themselves all at once and this caused confusion.
5. It is a new currency
Bitcoin is still a comparatively new currency as compared to older currencies like gold or Fiat notes. As these currencies have been in existence for a long time, their values have become more stable and predictable with a gradual rise or decrease in value. Being a newer currency Bitcoin does not have this benefit and hence as the time passes its value can become more stable.
In conclusion it is important to understand that as Bitcoin is a newer form of currency, there are to be some issues with respect to their value and usage. This is why it is so volatile. As the market comes to get a hang of the currency its value might become more stable as compared to now.
There are many other reasons why the value of this particular cryptocurrency keeps on rising and falling so quickly. This includes the changes created in the demand and supply of the currency due to market forces, the hoarding of a certain amount of currency by investors, the media perception of bitcoin as well as strict government interventions in certain states.
This kind of fluctuation can be reduced by ensuring that the media provides the right kind of information regarding cryptocurrency rather than hyping it up as well as ensuring that the laws of various countries become less stringent and more accommodating with respect to BTC. Alongside this, putting a limit on the maximum number of cryptocurrency that a person can trade in a day would also help control the market supply and demand of this currency leading to a more balanced value of Bitcoin.