What Makes Bitcoins So Volatile?

Bitcoins Work

Bitcoins volatility is always the primary concern among traders. As a trader, it is essential to know the factors that make this currency highly unstable. Like any other existing currency, the value of bitcoins is determined by the rules of demand and supply. Its price or value will increase with the increase in demand. In contrary, a decrease in demand of the crypto-currency leads to a depreciation in its value. To break this down, the price of bitcoins is determined by the amount that the trading market has agreed to pay. If a large number of people want to purchase bitcoins, then, its price will automatically rise. This article provides information on what makes Bitcoins so volatile.

Bad press factor

Statements by government officials and the press about bitcoins often scare those who want to invest in bitcoins. The idea that bitcoins can be regulated is never good news for potential bitcoin investors. Bitcoin adoption is usually met by bad press report or bad news. Such news creates fear in potential investors. One may fear to invest in bitcoins which later prohibits them from investing in bitcoins. However, veterans in the bitcoin industry take such news positively as they consider it as a maturing stage. As soon as the effects of the bad news vanish, investors take this opportunity to make more money.

News about security breaches

The negative and positive public concept about bitcoins is built by either the positive or the negative reviews given by digital media or the news agencies. In most instances, people tend to be attracted to bitcoins when they are advertised positively. On the contrary, negative reviews are often met with less attention.  Negative news about security breaches with bitcoins has made the investors think twice. This makes investors susceptible to choosing to invest in bitcoins or investing in the standard currency. It is worth noting that the volatility of bitcoins largely depends on the ability of bitcoin holders to have large portions of the currency. This means that bitcoins have not touched the bulk market adoption rates which may give an adoption value to a large holder of Bitcoins.

These are three of the main factors that make bitcoins to be more volatile than any other currency. Its volatility is influenced by the fact that bitcoins were designed to be infinite. This means that they can no longer be mined once they reach their limit. Therefore, you are advised to invest in bitcoins as long as you have the opportunity.