Bitcoin is the most popular cryptocurrency that has managed to survive for years despite the competitive market with several new currencies. It’s known for online trading, with people over the world investing it. However, just like all other cryptocurrencies, Bitcoin is highly volatile. It’s prices keep changing from time to time, making it hard to predict anything about it. Therefore, when you chose to trade using Bitcoin it’s is good to know the risk you’ll be taking, but wise to know the factors that cause its volatility.
The most common factor that causes the value of Bitcoin to change in demand. When there is a rise in the number of people who adapt to use Bitcoin, the demand rises. High purchases will lead to an increase in the price of Bitcoin.
On the other hand, when the demand decreases, it will cause the opposite effect. Hence, professional traders who follow Bitcoin trends will realize when the demand increases and purchase it, then later sell it when many individuals want to buy.
Regulations put in place for Bitcoin and other cryptocurrencies also affect the value changes of Bitcoin. Have you ever heard governments put more restrictions on the use of cryptocurrencies? Most governments and other regulatory bodies always watch Bitcoin activities. This is because of things such as money laundering and others that are usually associated with cryptocurrencies. When regulations are put in place, for example adding restrictions to the use of cryptocurrencies, they affect Bitcoin.
Do you ever watch the news and see a hype for a particular cryptocurrency? Did you feel the urge to start investing in it? Well, one of the factors that influence Bitcoin’s volatility is the media coverage. Any time Bitcoin receives positive coverage by the media, more persons will be attracted to it. This will have several people purchasing the cryptocurrency, hence the value will increase. The value might increase even be for the demand rises. When the coverage done by the media is negative, the value of Bitcoin might decrease tremendously.
Politics and its related events are some of the factors that influence the value of Bitcoin. How does this happen? When the citizens of a country lose trust and confidence in the economy of their country, they are more likely to resort to cryptocurrencies. Bitcoin being popular and trusted by several people will appear as a safe place for most individuals. For example, the crisis that happened in Greek in 2015 caused thousands of people to resort to Bitcoin and invest it. This can happen in any country that fails to pay attention to its economy and providing its citizens what they need.
Another factor that influences the value of Bitcoin is the changes that happen in the community. Bitcoin has a community that makes decisions on the progress and the future of Bitcoin. With the high competition and other problems that Bitcoin faces, the community has a responsibility to agree on what will give Bitcoin a great future. When they fail to reach a consensus in the required time, it may cause Bitcoin’s value to decrease. Their decisions on Bitcoin’s technology, Blockchain, also affects the value of Bitcoin, taking it to a higher or lower level.
Market cap which is Bitcoin market value, influences the value of Bitcoin too. Whenever the trend of the market cap is high, the value goes higher too and traders will receive more profit from their trading. When there is a downward trend, traders will have less profits from their trading activity.
Are you always too discouraged by the volatility of Bitcoin to invest in it? Worry no more because there is a solution to it that will help you make investments in the cryptocurrency of your choice. The trick is to understand these factors that influence its value. Understanding them will help you make proper decisions even when you are just an amateur in trading. Knowing these factors will help you know when to buy, sell, or just watch the trends. As they say, ‘Knowledge is power, ’ having this information will help you a great deal and know how to handle the risks that you will be taking. You won’t have to worry about much when you know what you are dealing with.