Anyone with any knowledge of Bitcoin, or really anyone that has read the news in recent years, is likely to know just how volatile this cryptocurrency is. Created in 2009, Bitcoin has since seen some incredible highs, and for those with investments in the cryptocurrency, it’s been an emotional rollercoaster. The question that remains, however, is just why the worth of these digital coins is so
volatile. Here, we’re exploring exactly that.
It’s Still New
Despite having been around for almost 10 years, Bitcoin is technically still very new. It has only truly gained popularity in the past couple of years and so the markets are still learning the coin and it’s behaviours regarding the bitcoin price. What’s more, due to the restricted amount of spending
options, people are clinging onto the coins they do have rather than spending them and with the small amount of people that actually own Bitcoin, this has the potential to have a massive effect on the market. With a good chunk of the world’s bitcoins currently being stored, anyone choosing to
release these out into the market at any time would change the value of the entire currency. However, with the growing number of people choosing to adopt this cryptocurrency, the potential for it balancing out grows with every passing day.
Bad Publicity
Bitcoin hasn’t had the best publicity in its time. At the beginning, it didn’t get much press at all for those who weren’t searching for it or within particular interest circles, but as popularity grew so did its coverage. However, with increased coverage comes increase spread of any negative or potentially stock-shaking news. Political statements regarding Bitcoin, countries choosing to increase regulation or ban it completely and an talk of fraud of danger around any cryptocurrency usually leads to a drop in worth of Bitcoin simply because current and potential owners tend to scare out of using it. However, just like average fiat currencies, this doesn’t often last for long and the price begins to rise once more.
Cryptocurrency Investments Aren’t Often Advised By Financial Planners
While Bitcoin or any of its altcoins were once seen as worthwhile, risk-worthy investments, it’s unlikely that you’ll find a financial planner who will advise you for or against it. In most cases, they ban talk of bitcoin altogether. While this isn’t putting down the cryptocurrency in any way, this lack
of publicity for those actually within the financial markets, or looking to be part of it, won’t get the advice and guidance they need for such a new cryptocurrency.
It’s Speculative
Bitcoin doesn’t have a base worth. There’s no bottom for it to fall to and certainly no original value. Its digital nature also makes it difficult to pinpoint a price onto and as a result, Bitcoin’s worth tends to rely on speculation and agreement between parties. Speculation as to the nature of the market is what changes Bitcoin’s price as opposed to any outside parties or events, and this is perhaps the riskiest part of the entire thing.
Could It’s Volatility Even Out In The Future?
The main reason for Bitcoin’s volatility is difficult to pin down, but no more so than deciding whether or not it will always be as volatile as it is today. Due to its decentralised nature and the lack of base price, the realistic approach would be no, however if the cryptocurrency grows in popularity, this could turn into more of a possibly. With the more people that adopt Bitcoin and join the market, the less control individuals have as a whole over the price of the coin and it’s more likely to actually be used as the currency it was created to be. More users means more stakes in the cryptocurrency, and this could result in stability.
Whether this will come to fruition in the future is all a matter of, you guessed it, speculation which is only proving to make Bitcoin’s current state just as volatile as any time before. However, with altcoins hot on its tail and a younger generation rising up to want to invest in the technology, the
future could truly hold anything.
