What Makes Bitcoin Volatile?

The last couple of years has brought cryptocurrencies into the limelight; this is mostly because of the pandemic that encouraged online transactions. 

And what springs to mind when someone mentions online payments? That’s cryptocurrency!

Although crypto popularity was already on the rise, the last couple of years has skyrocketed their popularity.

So what’s the first word that comes to mind when someone says cryptocurrency?

Yes, the Bitcoin!

Enter the Bitcoin

Bitcoin is the king of cryptocurrencies; it was the pioneer digital currency that was introduced to become an alternative to the traditional fiat currency – the domineering attitude of the intermediaries has been enough!

Since its inception, Bitcoin has been growing in worth and clout; from a value of a few bucks to crossing $60,000 last year, the trend has been gradually upward.

But there is a ghost that has always haunted Bitcoin.

You guessed it, volatility!

If there is one major reason that keeps potential customers at bay that is erratic volatility. Even the ones who have poured in their investments experience sleepless nights – you’re never sure when the Bitcoin price will crash.

Carl Runefelt is a global crypto leader who has invested in more than 360 crypto startups. He’s a strong proponent of Bitcoin and believes that it will eventually replace fiat currency in the long run.

While speaking on his YouTube channel, The Moon, he said, “I am very confident that this will be a very good investment. I believe that Bitcoin is not only going to go to $500,000, I think that Bitcoin is gonna go to five million dollars per Bitcoin in today’s money. Obviously, with inflation, bitcoin could go to trillions of dollars per Bitcoin. Actually, it will because it is inevitable, but because the dollar will collapse at some point.”

Why is Bitcoin Volatile? Countless factors affect and influence Bitcoin’s market standing. Before we delve into why is Bitcoin volatile, let’s understand the basics first.

Like every other trading commodity, supply and demand affect Bitcoin’s value. Bitcoin has a maximum limit of 21 million coins that can circulate in the crypto market at a given time. The nearer we will reach this number, the higher the price will get of Bitcoin.

The value of Bitcoin treads on a thin line. Merely a news headline is enough to drop its price, while a comment in Bitcoin’s favor from a prominent figure can appreciate its worth in minutes.

Below are some of the major reasons that make Bitcoin volatile:

Bitcoin whales:

Like whales in an ocean whose movements unsettle small fishes with waves, big financial players compete in the crypto market with their substantial Bitcoin holdings.

These powerful investors own a large number of Bitcoins; this means that any decision they make can adversely or positively affect the price of Bitcoin.

Hedge against inflation:

The varying belief in Bitcoin’s utility as a store of value and method of transfer drives its price in the crypto market. Some experts opine that it will continue to remain a store of value while others opine otherwise.

Carl Runefelt spoke in one of his interviews, I think that Bitcoin is the best hedge against inflation that we have in the world right now, and Bitcoin is also the best form of money that we have and have maybe ever seen in the history of humans. With that said, fiat is the worst form of money we have seen in the history of humans, and I see a huge transition now where we’re going to go more towards a crypto economy, and I am super excited about that.”

Still an emerging technology”

Bitcoin is still considered a nascent technology that is in the process of proving itself. Its embrace has been gradually increasing though, especially the last couple of years have expedited this trend.

With time, more and more companies and businesses are adopting Bitcoin as a form of payment. Tesla, Microsoft, KFC, PayPal, and MasterCard are some of the prominent ones.

Bitcoin is Here to Stay Many predicted that the Bitcoin phenomenon is merely a bubble that will burst and fade off. But Bitcoin has proved its resilience. Its embrace is on the rise now with tech giants accepting it in large numbers.

Bitcoin is set to replace fiat currency in the near future. The assertion may soon turn out to become reality.