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Understanding Bitcoin’s Market Volatility

Bitcoin was unveiled in 2009 by Satoshi Nakamoto as an alternative transaction currency free from government control. While the Bitcoin price was initially worth just about $0.09, it has steadily increased by tens of thousands over the years, sometimes rising or falling by thousands within days. The rapid and sharp fluctuations in Bitcoin prices are why people describe it as a highly volatile currency. To trade more efficiently, you must invest in a reputable trading platform like

Since its inception, Bitcoin has experienced a volatile price history, making some critics argue it is not a sustainable transaction currency. So, why does Bitcoin have such high market volatility?

The Main Factors Affecting Bitcoin’s Volatility

Understanding Bitcoin’s market volatility requires you to know the main factors that affect its prices. The following are the main reasons why Bitcoin is highly volatile.

Supply and Demand

Supply and demand are among the key factors influencing most commodities’ prices. Bitcoin’s market value primarily depends on the number of coins in circulation and how much people are willing to spend on it. Bitcoin’s supply can only be up to 21 million coins, meaning miners can supply no more coins after attaining that limit. It also implies prices will likely surge as it nears the 21 million cap.

It is difficult to accurately predict what will happen to Bitcoin prices once miners reach this limit. However, there is no doubt prices will likely fluctuate in response to investor actions as more prominent players compete to acquire it against the backdrop of a dwindling supply. The diminishing Bitcoin supply and growing market demand will likely increase prices over time.

Investor Actions

Bitcoin is currently the most prominent cryptocurrency that every investor is competing to get their hands on. Long-term, large-scale investors often opt to hold their Bitcoin, preventing smaller investors from gaining exposure. Those wealthier investors also drive Bitcoin’s market volatility to an extent.

The large-sized investors or whales with significant holdings can impact Bitcoin prices whenever they decide to liquidate their assets. Their holdings enable Bitcoin to maintain a higher purchasing power, keeping values up. However, any attempts at liquidating their assets would cause panic in the market, making other investors start selling off their positions. As a result, Bitcoin prices are likely to plummet.

Many exchanges today limit the amounts investors can liquidate daily to about $50,000. That implies investors can only quickly liquidate some of their Bitcoin holdings to avoid losses whenever prices plummet.

Bitcoin News

Several news outlets often present Bitcoin information, including expert price predictions. Investors rely on the media to learn more about Bitcoin and the crypto market. It is common to find opinion pieces from large-scale Bitcoin investors stating the cryptocurrency would soon be worth hundreds of thousands. Some also hype new cryptocurrencies to take away Bitcoin’s market share.

Nevertheless, media attention and publicity can influence Bitcoin’s prices to benefit those with more extensive holdings. For example, Bitcoin’s price skyrocketed for weeks when the media announced the introduction of a Bitcoin ETF by Proshare in late 2021. The price surged to more than $69,000. The market prices shrunk to about $50,000 as the hype died.

Other factors, such as government regulations, may influence Bitcoin prices upwards or downwards. Like the news, laws that cast Bitcoin in a bad light or curtail its usage will likely weaken the public’s trust and drive prices down. Nevertheless, Bitcoin is still in its infancy and may take time to understand its market volatility fully.

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