Why is Bitcoin so unpredictable in its value?
The value of Bitcoin has been fluctuating for quite some time now, and investors are handling the volatility like walking on a wobbly plank.
It is no surprise that cryptocurrency like Bitcoin is subjected to extreme instability. Watching its volatility over the years, the value of Bitcoin dropped around 30% in one day, and rose back up again about 12%. So why is Bitcoin, despite being so popular and profitable, highly unpredictable in its value? Read on to find out.
Changes in cryptocurrency acceptance
The prevalence of Bitcoin grew a moderate amount after major companies and services began accepting cryptocurrencies, especially Bitcoin, as a payment alternative. However, with time, many companies such as Tesla Inc. withdrew their tolerance of Bitcoin for payments, which drastically affected currency use. People started selling out their Bitcoins in masses, which in turn, led to turmoil in its value.
No fundamental value
Moreover, the volatility of Bitcoin is making it more challenging for users to believe in it. This cryptocurrency is not any share that has a solid basic price to rise back with, in case it faces a free fall. Hence, more and more people who are investing in Bitcoin are facing huge losses due to ‘false assumptions about the cryptocurrency. Purchasing a Bitcoin will not offer any return or give you the authority over the software. However, the usage of Bitcoin has been made simple, with the help of applications like the ethereum-code.me. In short, proper valuation is an issue that definitely causes a blockage in the growth path of bitcoins.
Manipulation of the Bitcoin market
Bitcoin may have characteristics that make it a similar investment to gold. However, the alleged promises and potential return stories spun around the cryptocurrency seem and are unreal. Some criminal minds operating within the Bitcoin community spread rumours about the potential worth of the currency in the future, and stimulate their investment ideas. However, it is too late before the many investors realize what the truth is, and the manipulators walk away rich and guilt-free. This manipulation happens because there is no institution to monitor the transactions, nor are there any regulations to bind them.
No buy-and-hold investments
This is the most vital ground for the volatility of the popular cryptocurrency. Many big shots and established investors keep far away from cryptocurrencies. This is mainly because big investors are used to the idea of shares or assets with a fundamental value. They often get hold of shares in bulk and hold on to them for years to reap decent returns. This concept is absent in the case of Bitcoin, and its investment idea is highly delusionary to established investors.
Since the largest share of the global wealth that lies among the established investors is missing in the Bitcoin community, the currency relies solely on individual small-scale investments. Even so, out of the total 21 million Bitcoins, 19 million are already under circulation. The lack of large-scale and recognised investments makes the Bitcoin value highly unpredictable.
Security violations in the community
The Bitcoin community is known for its transparent transaction ledger. However, the cryptocurrency also has faced several drawbacks due to this open-source data. Many wallets have become vulnerable to security breaches. This, in turn, instigated enormous cases of bankruptcy and thefts of piles of Bitcoins from users. These unpredictable losses and breaches also contribute to the volatility of the currency.
The large-scale losses in Bitcoin investments also led to a reduction in the total hovering of the cryptocurrency. When news about the same circulates the community, the individual investors fall into a dilemma. In such cases, the value of Bitcoin escalates significantly, due to the insufficiency of the cryptocurrency in the market.
The reason behind the unmatchable volatility of the Bitcoin currency is that it is merely an alternative to fiat currency. Bitcoin cannot be executed as an asset since it does not yield any revenue. The investor has to spend money for each transaction made. The idea of floating around Bitcoin as an investment or business option is simply speculation. The price of Bitcoin should hardly face any fluctuation if it is to be utilized as a currency option. However, since the investors are manipulated regarding the Bitcoin price at various periods, the market turns out highly unpredictable.
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