What influences the volatility of Bitcoin prices; Have you ever wondered why the price of Bitcoin is so volatile? Or what factors are influencing the volatility of bitcoin prices? This article was written to answer these questions and provide some insights about what it means when we say “the value of bitcoin is volatile.”
What is volatility?
Volatility is a measure of the difference in the price of an asset in relation to its average price over time. Assets like bitcoin that fluctuate in price periodically are said to be volatile. It is why Bitcoin prices can be high today and really low tomorrow.
What influences the volatility of Bitcoin prices?
Many factors contribute to the volatility of Bitcoin. These factors are usually related to the unpredictable crypto market dynamics and investors. More often than not, the market is not strong enough to withstand these changes leading to the volatility of Bitcoin prices. The factors affecting the volatility of Bitcoin prices are listed and discussed below.
Demand and supply
According to economics, the law of supply and demand of a commodity states that the higher the demand for a commodity, the lesser the supply, and vice versa. This rule also applies to Bitcoin and other crypto assets. Bitcoin’s current supply and rate of growth are set by code. There are a total of 21 million coins, of which more than 90% have already been mined.
Every four years, bitcoin undergoes the halving procedure, where the amount of Bitcoin is halved so that only a few coins are available to mine. This increases the time it takes to produce them and accrued expenses. This halving procedure may lead to a drastic increase or decrease in price. The next halving process is expected to happen in 2024.
Speculations and Sentiments
The price of Bitcoin can increase beyond expectations in a single day, which can encourage speculation and increase demand. Attention from the media and influencers can also fuel volatility. Good press will learn to increase in demand and increase in value, but bad press can send shockwaves through the crypto community and cause panic selling.
Liquidity and accessibility
The more people that use Bitcoin, the more valuable it will become because of the increase in demand. As Bitcoin expands its utility and more businesses around the world accept it as a medium of payment, its prices will rise. However, with countries attempting to regulate Bitcoin use or even banning the currency, we can only hope it positively affects the price.
Bitcoin is said to be the most liquid cryptocurrency. It can be easily bought and sold on exchange platforms like Astro Africa and converted to instant cash. One advantage of cryptocurrency is that it encourages price stability. This means that the more liquid Bitcoin becomes, the higher chance that its price becomes stable.
Associated risks
Because investors are aware of the volatility of Bitcoin, they always think twice before investing. Bitcoin is prone to hacks and theft, and there are few plans in place to ensure that stolen Bitcoin can be retrieved. All these cumulate in the volatility of Bitcoin.
Will Bitcoin remain volatile?
Many crypto enthusiasts, analysts, and investors speculate that all the factors causing Bitcoin to be volatile now and in the past will disappear as time goes on. Several countries worldwide, especially in Africa, are setting up effective measures to regulate the usage of Bitcoin in their country. The more long-term regulations are created for Bitcoin, the less volatile it will become.
It has also been speculated that the number of individual holders will decline as the price of Bitcoin increases. This is simply because as Bitcoin becomes more expensive, the amount of fiat currency required to purchase it increases, putting upward pressure on the market price. Big investors in Bitcoin will be able to stabilize the market in their way by increasing sell pressure and reducing the pressure on the market price. Putting faith in the big investors can also end badly because what if they decide to HODL their assets and restrict sell pressure? We can only hope for the best, whichever way the tide takes us.
Trade Bitcoin for money at the best rate in Nigeria
Despite the volatility of the price of bitcoin, the number of crypto traders in Nigeria has continued to increase. Normally, you would expect a sudden decline because of “fear of the unknown”, but the reverse is the case. So, Astro Africa is for you if you’re a new crypto trader looking for a place to sell Bitcoin for cash and get paid instantly. The platform prioritizes the needs of its customers by selling Bitcoin and other cryptocurrencies at the best rates despite the condition of the exchange market. The platform is filled with features that make trading easy and seamless. To start, visit the Astro Africa website or download the mobile app, create an account, and start trading immediately.
