Bitcoin is one of the most popular subjects in the financial arena. Since its inception, there has been a lot of changes in the digital finance. Cryptocurrencies have influenced the global economy in numerous ways.
However, cryptocurrencies like Bitcoin are itself a highly volatile product. Their value is fluctuating every now and then. According to ICO Token News, its value rose from $1,000 to 20,000 in 2017 before dropping down to $13,000. This just indicates how volatile this commodity is.
Given its variable nature, Bitcoin investment can be risky, especially for the beginners. But what makes Bitcoin so volatile? Here are some of the reasons listed:
It is still new
Even though Bitcoin was released first in 2009, only 9 years have passed and is relatively new compared to other financial products. In fact, it only gained popularity in 2017. Only a tiny proportion of people all across the globe owns Bitcoin. This means that a single person can influence the value of Bitcoin. The price is also influenced by how different countries deal with the idea of cryptocurrency.
It is different
Bitcoin brought about unprecedented changes in the global economy because it is entirely different from the things that came before it. It is treated differently from other currencies and financial products. This directly leads to a lot of instability.
The Bitcoin trading never stops unlike other investments. There are no fixed market hours which means there is more and more fluctuation in its value and high level of instability.
Events happening all across the globe sometimes scare Bitcoin users and hampers the adoption rate. The events may include political statements by governments about the regulation of Bitcoin. This may instill a fear in investors hindering more investments. These incidents lead into public panic that further drives the value of Bitcoins. However, this is an indication of how the digital currency market is going through a stage of maturity and how it has been going under the stage of development.
Can it become more stable?
The value of Bitcoin is fluctuating on regular basis. This have not only impacted the investors but the whole digital market. Other cryptocurrencies are also impacted by the fluctuations taking place in Bitcoin market. This is why attempts are been made to make this a more stable currency. But is it really possible?
Even though it is a matter of speculation, there are some steps that can be taken by different groups in order to make it a more stable product. Increase in its popularity can increase its stability because more people will invest in Bitcoin and individuals will then have less power over the value. Since more people have stake in the cryptocurrency, its value would be less likely to fluctuate.
Other way to achieve stability is government regulation. Even though it would cause Bitcoin’s value to drop drastically, as happened in China and South Korea, but in long-term, the price would get more stable attracting more investors.