The value of Bitcoin has surged from $1000 to $19,000 last year. Everyone has noticed that the value has ascended and dropped occasionally from day to day. Its unstable nature also having the greater impact on smaller cryptocurrencies like Ether and Ripple.
If you are looking to invest or trade in the cryptocurrency space, then it is very momentous to understand the concept of Bitcoin volatility.
Our enduring exploration divulges several aspects that affect the price of Bitcoin such as media hype and uptake by peers, political uncertainty and risk, steps by administrations and regulators, and the supremacy of Bitcoin itself.
Here are the most imperative take-away of the Bitcoin volatility analysis on our information.
Economists believe that humans psychological factors affect investor decisions. This is known as Animal Spirits refer to investors making decisions which are based on the concert of other market contestants and their own sensitivities, rather than solid investigation.
Scrutiny of the Bitcoin price displays that encouraging media exposure is one of the main factor driving the price.
Degree of acceptance is hindered by bad press
The regulation proclamation made by governments and geopolitical events fright the Bitcoin users. Crypto news stories probably may produce the fear among investors. News stories such as the bankruptcy of Mt. Gox in the year 2014 and recent news from South Korean exchange Yapian Youbit.
All these episodes and the public apprehension that resulted drove the Bitcoin value versus fiat currencies down swiftly.
Political Hazard around state currencies can also distress the Bitcoin price as people practice it to hedge against price movements in a specific currency, or they require to rapidly move large amounts of value out a country or currency.
Greece economic crises in 2015 were followed by reports of increased in the rate of adoption of Bitcoin by the Greece citizen wishing to safeguard their wealth. This did not appear to affect the Bitcoin price on global markets, however, which persisted steadily between $300 and $400 for most of the year.
However, anxiety about the national referendum for Britain to leave the European Union on the month of June 2016. It is succeeded to increase the Bitcoin price in conjunction with the decrease in value of the British pound.
The US election for president causes two-month vertical growths in the value of Bitcoin.
Bitcoin tax action also disturbs the volatility
The recent note released by the IRS stating that the currency is essentially an asset for tax purposes which had mixed effects on volatility. Upwards, any declaration identifying the currency has a positive effect on the market valuation of the currency. Downwards, the conclusion by the IRS to define it property had two negative effects. The first was including complexity for users who need to pay with it. Under the roof of new tax law, the users need to record the market value of the currency during every transaction period. Next, the verdict to define it as currency a form of property for tax purposes is an indication to some market individuals. Since that the IRS making to administer robust regulation protocols later.
Introducing stronger regulation may decline the acceptance rate of the currency. And will fail to reach anticipated adoption rate of the currency. However, recent steps of IRS are vague but there are enormous effects on the Bitcoin Market.
Ivan Tello, the technical analyst in the Elliot Wave Principle at ruartereports.com replied the following notion of Bitcoin volatility.
“The price of Bitcoin is seesaws by human psychology, by people who believe that in the future. It will be worth more or that the morning news will affect it negatively.
The price goes up and down because of an ongoing struggle between two tireless forces, the bulls and the bears. People who need the price to climb to win versus people who need it to come down to win, people who believe that Bitcoin is cheap or expensive. Technical analysis does not explain, nor study, nor analyze the reasons why the price goes up or down. However that is what journalists do, they attach a name, a title, so people can understand the reasons why the price fluctuates. But basically they do not know why it increasing or decreasing, or if news spread before it was published”.
Why people usually sell Bitcoin?
The primary reason is that acceptance of Bitcoin is less comparing to the acceptance of fiat currency. This fundamental reason explicates why people are selling their Bitcoins.
Typically, Bitcoin is using for transfers which do not help the currency. Likewise, if the Bitcoin is sent to other citizens of a different country having low adoption rate. Obviously, the recipient of that country will get the Bitcoins with lesser price in their exchanges.
People who accept Bitcoin and later exchanged for fiat currency are commonly doing it. However, because of the Bitcoin’s volatility and the failure to wage their dealers with cryptocurrency.
Additionally, the majority of miners are forcing to sell their Bitcoins to wage the electricity and other associated costs needed to operate mining operation.
Hence the Bitcoin’s Volatility and lack of adoption is the main factor for selling the Bitcoin in the real world.
Note: Coinpedia is a news agency and not criticizing any cryptocurrencies in particular. The information is only to create an awareness and make user updated with the current markets trends.