Anyone that’s attempted to invest in Bitcoin in the past is likely aware of just how volatile this currency can be. It’s possible for the value of the coin to jump by thousands of dollars in a single day, and that happens routinely. This is something that most investors have learned to live with, and some of the richest have learned to harness those fluctuations to help them increase their overall investment portfolio value. We’re not interested in how people make money off Bitcoin though, what we’re going to focus in on is the fluctuations themselves. It’s interesting that Bitcoin fluctuates so much, and we’re going to dig into just why that happens.
Bitcoin is Incredibly New Still
One of the main reasons that Bitcoin is volatile is because it’s a very new technology that most people still don’t understand well. As investors, and governments decide how they are going to treat Bitcoin, this affects its overall value. For instance, when China talked about regulating Bitcoin and other cryptocurrencies more strictly, the value of Bitcoin dipped down. Regulation changes in any country will cause people located there to sell off their coin, and drop the value down somewhat.
The Press Affects Bitcoin Values in a Big Way
Since Bitcoin and the idea of cryptocurrency itself is still relatively new, many of the investors are a bit nervous about having their money tied up in the currency. They are investing into Bitcoin in hopes of seeing massive returns when the currency value spikes up, but they are very afraid that the value is going to drop down aggressively as well. For that reason, they pay very close attention to the media as far as any story in Bitcoin is concerned.
A negative story or press release about Bitcoin from any major news outlet can have a huge effect on the overall value of Bitcoin, and that’s because these stories cause investors to panic and sell off their holdings in Bitcoin as fast as they possibly can.
The bankruptcy of Mt. Gox in 2014 is a perfect example of this. When the story was released Bitcoin prices plummeted downward as investors thought the end of the currency itself might be near. Mt. Gox is one of the biggest Bitcoin exchanges in the world, and was a major tool that most of the investors were using at the time to move money between Bitcoin and their currency of choice. Seeing the exchange in trouble made these investors panic and worry that something would happen to all their coins if the exchange shut down.
The same thing occurred with the story about the Yapian Youbit exchang in South Korea and the same occurred when press got out about Bitcoin being used for Silk Road transactions and the FBI getting involved.
The press can drive Bitcoin values down rapidly, but those dips usually don’t last, and it’s very common for the price to come surging back up once again a few days or weeks after a major scandal.
Most of the Bitcoins are Owned by Very Few People
Another reason that Bitcoin prices are so volatile is because about 95% of the current cryptocurrency is owned by just 4% of the people using Bitcoin. With such large holdings of the currency, a single big holder could significantly affect the price of Bitcoin by selling off a portion of their holdings.
Even though Bitcoin Values keep jumping all over the place, and they are likely to continue doing so for quite some time still, it looks like that they will eventually stabilize. Bitcoin is just so new, and it’s unlike anything that came before it. Governments, banks and major investors all over the world are trying to come to grips with the technology. Bitcoin betting sites and cryptocurrency online casinos are trying to catch the wave too. Each of these different influencers is changing the value of the coin in their own way, and it isn’t until everyone is more comfortable with Bitcoin that prices will stabilize.