What Makes Bitcoin So Volatile?
After being teased in late 2016, ‘Bitcoin’ touched a new
record high level in the first week of the current year. There could be several
factors causing the ‘Bitcoin’ to be volatile. Some of these are discussed here.
The Bad Press Factor
‘Bitcoin’ users are mostly scared by different news
events including the statements by government officials and geopolitical events
that ‘Bitcoin’ can be possibly regulated. It means the rate of ‘Bitcoin’
adoption is troubled by negative or bad press reports. Different bad news
stories created fear in investors and prohibited them from investing in this
digital currency. An example of bad headline news is the eminent utilization of
‘Bitcoin’ in processing drug transactions through Silk Road which came to an
end with the FBI stoppage of the market in October 2013. This sort of stories
produced panic among people and caused the ‘Bitcoin’ value to decrease greatly.
On the other side, veterans in the trading industry saw such negative incidents
as an evidence that the ‘Bitcoin’ industry is maturing. So the ‘Bitcoin’
started to gain its increased value soon after the effect of bad press
vanished.
Fluctuations of the Perceived
Value
Another great reason for ‘Bitcoin’ value to become
volatile is the fluctuation of the ‘Bitcoin”s perceived value. You may know
that this digital currency has properties akin to gold. This is ruled by a
design decision by the makers of the core technology to restrict its production
to a static amount, 21 million BTC. Due to this factor, investors may allocate
less or more assets in into ‘Bitcoin’.
News about Security Breaches
Various news agencies and digital media play an important
role in building a negative or positive public concept. If you see something
being advertised Advantageously, you are likely to go for that without paying
much attention to negative sides.
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