Bitcoin, in recent years, has become one of the most attractive assets for investors. Being so popular and innovative, people still are unable to understand its working and price variations.
Even experts are unable to identify the reasons behind this variation (both upwards and downwards) in the prices of Bitcoin.
Bitcoin Value Variation
Value variation is the change in the price of Bitcoin, over a while. Many factors can be responsible for this variation. Some of these factors are identified and discussed below:
Factors Responsible for Variation
Several factors are responsible for why Bitcoin variation is so persistent.
News has a significant effect on the price of Bitcoin. In case of good news, the prices will rise and in case of bad news, the prices will fall and investors will sell their positions, expecting the price to drop even further.
- Security Vulnerabilities
Another factor responsible for price fluctuations in Bitcoin is a security vulnerability. Whenever vulnerability about the Bitcoin network is exposed, it causes panic among investors and also leads to price fluctuations.
- Floating Value
Bitcoin has a floating value and is completely based upon the action of buyers and sellers. With no regulatory body involved, the price of Bitcoin is directly affected by its demand and supply.
- Fear of Loss
The high volatility in prices of Bitcoin makes it a profitable venture, but also adds fear of loss. There have been occasions in the past where prices of Bitcoin have risen and fallen drastically without any range, incurring huge losses to investors. Investors fear that if this happens again they may not recover from the losses.
- Uncertain Future
Predicting the future value of Bitcoin is impossible. Because of the high volatility of Bitcoin, predictions are impossible to make. The price of Bitcoin doesn’t rely on certain factors but is dependent on random factors like news, financial crisis, etc.
Bitcoin is strings of data that are encrypted, having an exchange value in the market. Bitcoin, unlike any other traditional currency, is not issued by a government or central bank. The prices of Bitcoin are not determined by factors such as economic growth and the rate of inflation.
- Supply and demand
Where the supply of Bitcoin is fixed, the demand for Bitcoin is variable. With only 21 million Bitcoins to be mined in total, the value of Bitcoin will increase, with the rise in investors. Bitcoin is considered as store value, investment in Bitcoin by many is done during times of economic instability, resulting in price fluctuations.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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