Bitcoin is one of the largest Cryptocurrencies that has been able to emerge as a lucrative investment option for people and firms. However, for the longest time, Bitcoin has been criticized for its volatile nature. The high price fluctuations have kept some of the seasoned investors away from exploring Bitcoins as an area of investment.
The demand and the supply position of Bitcoin are fundamental reasons for the volatility of this Cryptocurrency. The bitcoin revolution narrates the entire story regarding the volatility factor of this high-value Cryptocurrency. Better to say that it is not the story but the reality that many investors in Bitcoin need to understand.
Reasons for The Volatility of The Bitcoin
There are many reasons for the high volatility rate of Bitcoin in the global market. Therefore, let’s explore some of the crucial reasons for this matter to understand it better.
1.Low Liquidity Rate
Bitcoin’s liquidity rate is one of the significant issues of this Cryptocurrency; this is why the investors in Bitcoin experience sharp volatility. Due to the low liquidity rate of Bitcoin, investors experience sharp price fluctuations in Bitcoin.
Therefore, before you invest your money in Bitcoin, ensure the liquidity rate of this Cryptocurrency. You need to understand the market condition before you invest your money in Bitcoin.
The regulation is another prime cause of Bitcoin volatility in the world market. Different countries of the world have different kinds of rules regarding Bitcoin usage. This is why the volatility rate of the Bitcoin increases.
In the year 2009, Bitcoin first came into existence. Since then, the governments of many countries of the world have tried to regulate Bitcoin. Like in 2015, the Community Futures Trading Commissions of USA declared that Bitcoin and other Cryptocurrencies were commodities, and therefore, the government agencies could easily regulate them.
The influence of the news channels and media can result in more volatility of Bitcoins. When the news is on a positive note, then it attracts more investors towards Bitcoin, but when the information is negative, then it downsizes the interest of the investors to buy the Bitcoins as per their requirements.
The news events can create a more significant impact on the volatility rate of Bitcoins in the global market. You need to understand the impact of current news before investing your money in Bitcoin. You can also take the reference from the Bitcoin Gemini to clarify your doubt as per your requirements.
4.Shifting of The Sentiments
Shifting of the sentiments in Bitcoin may result in the high volatility rate of this Cryptocurrency. Some news events can create a significant impact on the views of the market participants of the Bitcoin.
Therefore, you need to understand the impact of the current news and consider the market sentiments to ensure a better return from your investments in Bitcoin. You need to consider these things seriously. The more actively you think in this matter, the less volatility you will face while trading in Bitcoins.
5.Inequality of Wealth
The equality of wealth can result in price fluctuation and an increase in the Bitcoin volatility rate. For example, if ten wealthy people of a nation purchase 60% of the Bitcoins, then the left-out portions will go towards the middle-income group of people, resulting in the unequal distribution of the Bitcoin.
Make sure that you have the required budget with you to incur the investment of the Bitcoin. Otherwise, you can put yourself in deep trouble. One of Bitcoin’s greatest cons is high volatility; hence, you need to do thorough research before you make investments in Bitcoins.
Bitcoin can make you or can break you in your trading career. You need to understand the market situation carefully. It will help you make the correct decision regarding the perfect timing for investing in Bitcoin and any other Cryptocurrencies.
Make sure that you make proper investment decisions as per your requirement while investing in Cryptocurrencies. Therefore, you need to develop your investment plan in a better way to get the desired result.
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