The value of Bitcoin is comparatively volatile. Just consider the time period where the value increased by 8 percent. This volatility has many factors behind its ups and downs. Traditional markets monitor the rate of volatility by CBOE Volatility Index or simply Volatile index. This is used for monitoring the changes in the value of Bitcoin over various periods of time and place. But have you ever thought about why is this volatility so rapid? Well, if you have not then here are some reasons that will inform you about the volatility of Bitcoin.
- Unpredictability about the future value of Bitcoin:
Since the future of crypto currency or virtual money is yet unpredictable so the question arises if Bitcoin is a good thing to store as an investment and for the transaction of money or not. The reliability of Bitcoin is doubted that is why it is volatile. The perceptions regarding the store of value of Bitcoin vary so its need for exchanging of goods and services. The status of Bitcoin is also uncertain in the respect of transferring properties from one to the other party. This is the reason why the value of Bitcoin is volatile besides its wide use. Also, the news and such events cause much to the value of Bitcoin.
- Investment rate decreases with Bad News:
Fear has no cure and so there is no way to stop the news channels from spreading fearful news about Bitcoin and cryptocurrency. The news channels publish headlines with spicy titles saying the government will soon ban crypto currency from the state and this haunts the investors from inside and out. Moreover, the news about the virtual currency being used for illegal activities is drowning its image as an incident was reported where a group was arrested by the FBI as it was trading illegally through the Bitcoin transactions for drugs. This way the value of Bitcoin becomes volatile.
- Risks for the holders of larger currencies:
The people who are holding large amounts of float currency also have some influential effect on the volatility of Bitcoin. The people having more than ten million dollars need to liquidate their position but it should not move the market. The bad point here is that they need to withdraw within a short time period o twenty-four hours and it becomes really stressful to do so.
- Interpretation of the oscillating value of Bitcoin:
Comparing Bitcoin with the fiat currency we can see that the value of Bitcoin is quite fluctuating but the thing is that the value of Bitcoin keeps swinging because they have a fixed number of their production. You can compare it with gold as regard its production. The average of Bitcoins formed is 21 Million BTC. On the contrary, the fiat currencies are managed by the government who then regulate the monetary and economic policies and decided if they have to control inflation or spend the money somewhere else if they want high employment and more flow of money or less flow of money in the market but the case of Bitcoin is comparatively different. This is also playing part in increasing the volatility of Bitcoin. If you want to know more about the volatile values of Bitcoin you can visit this site bitcoinera.app
- More value causes more loss
There have been a number of thefts in virtual money and the loss were massive like in billions of dollars. These thefts make people conscious about investing in Bitcoin. And this paves way for the volatility of Bitcoin. Then, the news reported in such a harsh tone that it further made the value of Bitcoin volatile. The older firms who were operating the system at the time of thefts are often replaced with the new ones who were suggested to learn from the mistakes of their seniors to avoid such losses by their foolishness.
The article was about the volatile value of Bitcoin. Volatile Index is used to monitor the change in value. The article has discussed the reasons for the volatility briefly. The more threats of the virtual currency being banned in the future because of its involvement in illegal activities give goosebumps to the investors. Then, there have been incidents of theft where despite having a number of nodes on various dimensions millions and billions of rupees were lost. Also, the news tries to create hate in the hearts of people regarding the use of virtual money.