We are completely aware of the fact that the price of Bitcoin fluctuates. But how many of us do know the actual reasons behind the fluctuations we encounter? In fact, the reason is not in the singular form; there are several reasons that work behind the price changes of Bitcoin.
The volatility or fluctuations of any type of asset is actually measured by the volatility index. But when it comes to digital currencies, there is no volatility index to consider. But very recently, luckily, a volatility index has been found to measure the fluctuations of the most popular and demanding Crypto, Bitcoin.
Why Does The Price Of Bitcoin Fluctuate
The history of Bitcoin tells the story of its volatility. Here, in this article, we will talk about the major deciding factors behind the price fluctuations of Bitcoin. All these factors are effective for other Cryptocurrencies as well.
1. Currency Holding Risks
A number of smart investors hold a significant amount of Bitcoins, which affects the volatility of this particular Cryptocurrency as well. There’s simply no certainty that the investor, who is holding a huge amount of Bitcoin, will be going to liquidate their positions from the Crypto market.
So, whenever they liquidate their holdings, a major change takes place in the market and causes significant price fluctuations. So, from this, we can conclude that on the basis of the large holdings of investors to some particular extent, the price fluctuations happen.
2. Prediction By Crypto Experts
Another significant reason for Bitcoin’s price fluctuation is the predicted valuation of Bitcoin by the Crypto experts. A huge part of traders, investors, and even common people follow different communities like the crypto genisus in order to know the value of Bitcoin.
Whenever the experts are predicting the future of any Cryptocurrency of Bitcoin, it usually varies from one person to another. It is one of the responsible reasons behind the frequent price fluctuation of Bitcoin. In fact, all these predictions have the potential to decrease and increase the value of Bitcoin.
3. The Effect Of News
One of the major concerns behind the rapid fluctuations of Bitcoin price is the effect of the news. Whether the news is bad or good, it directly affects the volatility of Bitcoin. During the initial years, the investors used to be scared of the major frauds, scams, and illegal activities related to Bitcoin.
Events like Silk road and Mt.GOX are some of the negatives, which brought Bitcoin into controversy and provided a bad name. Many traders and investors have lost their money. The effects of all these were there for a really long time.
4. Fear Of Loss
A number of previous high-profile losses has already set fear in the mind of the investors and public. As a result of this, many investors are also giving up on their investment in Bitcoin.
Eventually, it affects the price of Bitcoin and ends up with rapid price fluctuations. In the past, one of the greatest losses was the Mt. GOX scam in the history of Bitcoin. It has already set fear in people’s minds.
5. Security Breach
Last but not least is the security breach. When we are talking about a digital currency or Bitcoin, we simply can not ignore the effect of a security breach. After all, Bitcoin is developed by the public, and you never know when someone is using it for their evil intentions.
For example, the online platforms or software solutions needed to store Bitcoin and trading might be vulnerable to any form of security breach or cyber-attacks. It can really be a potential reason for which people might not think about adopting Bitcoin and will affect the price fluctuations.
All these mentioned factors world together and also individually in affecting the price fluctuations of Bitcoin. Though we can also say that this volatile nature also favors getting higher returns in a shorter time period. But while investing, you should consider all the price fluctuation factors of Bitcoin.