Volatility of Bitcoin
The crypto community was particularly active over the weekend of 15 March, as bitcoin had broken its record rate again. It traded at a price above $61,500. You may be wondering about the reasons for such price fluctuations, but there are many factors that affect the rates in the crypto-currency market. In this article, we will try to give you an explanation for the extreme volatility of the price of crypto-currencies, especially bitcoin.
To begin with, the phenomenon of volatility occurs in all sectors of the economy. As you know, volatility measures changes in the price of an asset over a period of time. It is no secret that the bitcoin price is more volatile than traditional assets. There have been times when the price of bitcoin has changed dramatically in a matter of hours as a result of certain news, events, or investments.
One of the reasons why bitcoin can fluctuate in relation to the facts is that cryptocurrency prices obey the law of supply and demand. The latter law is one of the major factors behind the ups and downs of all stocks on the planet. Bitcoin is seen as a speculative asset similar to gold. The developers of the original technology have limited its production to a fixed amount of 21 million BTC. The value of bitcoins can therefore fluctuate according to events and also according to the number of investors. The more new investors want to buy Bitcoin, the more the Bitcoin price will rise. Various studies have shown that the media is the biggest source of influence on the price of Bitcoin and other cryptocurrencies. More media coverage, therefore, allows for greater adoption of cryptocurrencies and Bitcoin by the general public. This can potentially attract new people to cryptocurrencies.
All of this, therefore, makes the Bitcoin and cryptocurrency market much more volatile. It is likely that as Bitcoin and the cryptocurrency market as a whole mature, this high volatility will tend to disappear, limiting the risk.
But even so, the volatility of cryptocurrencies plays into the hands of investors, as the rapid price movement allows for potentially large short-term gains. When the investor uses the HODL investment strategy, this will have less impact. With the development of the cryptocurrency industry, new tools are being used to assess the reasons for the fluctuations of cryptocurrencies to get better predictions.
This high volatility of cryptocurrencies has allowed some people to make very large profits on their investments. One of the main reasons for this volatility is the uncertainty regarding cryptocurrencies from a political and economic perspective. In addition, if large companies (also called whales) invest large amounts in bitcoin, its price will probably rise. Moreover, some studies show that investors prefer to invest more when the price of bitcoin falls and invest less when its price rises. Thus, when the price of bitcoin falls, there are traders in the market who invest even more funds in the digital asset, thus preventing it from falling significantly.
Therefore, the bit4you trading platform is pleased to introduce its Demo Mode. The demo mode is a powerful tool that helps you get familiar with the cryptocurrency market and practice with $100,000 of virtual money. This is an opportunity to learn how traders operate in the cryptocurrency market, as all the necessary tools are available in one place: whether you use a desktop version of the bit4you platform or take advantage of its mobile app. In addition, one of the advantages of bit4you is that you will have a goldmine of useful information that you may need while you practice. Enjoy learning new techniques about the cryptocurrency market by reading educational articles. Determine when to buy or sell your crypto assets with the help of charts, indicators, and diagrams. Feel free to trade and exchange more than 20 crypto assets on the bit4you platform. Learn risk-free with bit4you’s demo mode!
Valentina BEREZA, Team bit4you
