Why Does The Price Of Bitcoin Fluctuate: 5 Things You Should Know?

Many people are finding the reason behind the fluctuation of the price of bitcoin. There are several reasons behind it. Well, the fluctuation or volatility of any asset is measured by the volatility index. Earlier there was no volatility index for digital currencies. But recently, a volatility index is available to measure the fluctuation of the price of the leading crypto coin.  

If you go back to the history of bitcoin, you will find that the price of bitcoin is quite volatile. In this article, I will be sharing the five most important things for which the price of bitcoin keeps changing. 

The Effect of News

It is one of the major concerns of bitcoin price fluctuations is the effect of the news. Whether its bad or good news greatly impacts the adoption of bitcoin. In the initial years of bitcoin, investors got scared due to the major scams, frauds, and illegal activities related to the bitcoin market. Some of the negative events like Mt.Gox and Silk road have put bitcoin into controversy and a bad name. Investors and traders have lost their money from the market. 

As a result, the impact remained for a long time, even today that news has a big impact on the adoption of bitcoin. Other news like regulation by the government, ban form the government also reduces the adoption of bitcoin. As a matter of fact, most people withdraw their holdings of bitcoin which changes the price of bitcoin. 

Such bad news has a negative impact on the price of bitcoin, and the price of bitcoin reduces to a low value. On the other hand, bitcoin investors are holding irrespective of the bad news and have gained significant profits from the market. Another reason for the price fluctuation is the prediction of the future of bitcoin sways the value of bitcoin. 

Prediction by Crypto Experts

Another major reason for the price fluctuation of bitcoin is the prediction of its valuation. Most of the traders, investors, even general people follow different communities to know the value of bitcoin. When experts predict the future of bitcoin, it varies from person to person. This is one of the main reasons why bitcoin value fluctuates. These predictions can increase and decrease the value of bitcoin.

Currency Holding Risk

Some of the bitcoin investors are holding large amounts which also affects the volatility of bitcoin. There is no certainty that the investors who are holding a large amount are going to liquidate their position from the market. When they liquidate their position there is a huge change in the market and the price fluctuates significantly. So, the price fluctuation also depends on the large holdings of investors to some extent. 

Security Breach

The security breach is also one of the major reasons for which the value of bitcoin changes. As bitcoin is developed by the public, there is a major chance that people can use it for an evil means. For example, the software solutions or platform that is required for bitcoin storing or investing may be vulnerable to cyber-attack or any other form of a security breach can be the potential reason for which people may not adopt bitcoin. 

As it is a public ledger, anybody can see the transaction and this is also a form of privacy lack which many people don't like. So, this is the reason many people reject the idea of investing or using bitcoin. This also fluctuates the value of bitcoin to some extent. 

Fear of loss

Some earlier high-profile losses had set fear in the public. Many investors are also giving up their investment from bitcoin and this also affects the price fluctuations. One of the greatest losses in the past in the history of bitcoin is the Mt. Gox scam which had set a fear among investors.

Final Words

Finally, you have understood why the price of bitcoin fluctuates. Still, many investors are earning huge profits from investing in bitcoin. Some traders are also using trading bots for investing in bitcoin. If you want to trade automatically, then visit  bitcoin evolution where you can write an algorithm for automatic trading. Please share your views on this article in the comments below.