From the moment it came onto the scene about 15 years ago and changed both the tech and finance industry, Bitcoin and other cryptocurrencies that followed have been infamous for one thing. It is something that even those who have never owned BTC know about. Of course, we are talking about the dreaded price fluctuations. Buying, selling, and trading crypto is never a sure business because their prices can drop seemingly overnight out of nowhere. Similarly, they can rise at the moment nobody expects, which is not always ideal since traders cannot react on time. In this article, we talk about why the value of Bitcoin is still fluctuating after all these years and what the main reasons for it are.
The Inherent Nature of Crypto
Cryptocurrencies and Bitcoin as their leader have been integrated into many businesses since they were first introduced. It has been a great investment, an alternative way of money transfer and purchasing. On Bitcoin casino’s blog, you learn how it is now present in gambling. Still, it has always remained unpredictable and volatile with price drops and rises. No matter how much time passes, traders and investors still lack the knowledge on how to predict this and prepare for it. Why is it so and will it always be the case? Let us find out.
Supply and Demand
First of all, there is the supply and demand. Like with any other valuable item, the more it is wanted, the pricier it gets, but if there is enough of it it goes down. With BTC though, the fixed supply is 21 million. When demand rises, which usually happens when investors show more interest and when new industries adopt it, prices increase. When negative news strikes or when there is market fatigue, the price declines. Add to this the capped supply we are slowly approaching and the result is a lot of unpredictability.
Regulations and Laws
A big thing with crypto is the secrecy and anonymity it offers the users, as opposed to traditional currencies controlled by banks and governments. Therefore, the regulatory environment surrounding digital currencies is always shifting and changing. Announcements from regulatory bodies that immediately impact the market have their consequences as they change the value. Simply put, favorable regulations boost prices while restrictions and bans cause sharp drops. Speculative trading and the feat of BTC losing value then cause price volatility.
Changes in Tech
Considering cryptocurrencies’ deep connections with modern technology, it goes without saying that changes in this field influence their prices. The blockchain network and the overall basis on which cryptos work evolves and the ecosystem can impact the prices. There are upgrades, forks, and new features constantly being introduced that enhance the use and appeal of BTC. Prices go up if these are applicable far and wide. However, new security vulnerabilities and network issues can undermine users’ confidence, resulting in price drops.
Macro-economic and Geopolitical Factors
This is very similar to other areas of life on a global scale. Global economic and geopolitical conditions like inflation rates, interest rates, tensions, and conflicts have great implications for crypto and its value. All of this influences investor behavior and further changes regulations. Economic uncertainty hits everything, be it the strength of the US dollar or the value of a digital coin like Bitcoin. Many now turn to crypto when markets crash, increasing demand and therefore the prices. When economic stability is achieved again, interest and value will certainly drop.
Market (and Investor) Maturity
A big thing about a novelty item is how much people understand it and know about it. While crypto is still very young in the grand scheme of things, many people now know exactly what it is. Five or so years ago, that was not the case, let alone a decade ago. Young markets are more volatile though when compared to traditional markets. As they mature, fluctuations stabilize but the combination of everything mentioned above still has its influence as it is difficult to get used to it and find the perfect timing.
Conclusion and Takeaways
Not even stock brokers who have spent decades on the stock market know when to buy or sell. That is the game, and volatility and fluctuations are traits that Bitcoin will always have. It is so deeply connected to its core that it becomes near-impossible to separate it. The complex problem of supply and demand as well as all the market, regulatory, tech, and other issues result in a very rough market to predict and navigate. It will still take some time for the industry to settle and for all of us to determine whether or not crypto, and Bitcoin in particular, will always be so volatile. Perhaps, some time down the line, it will be an easier road to traverse and more akin to what we are used to with traditional currencies. But won’t that beat the purpose of cryptos being different?
