Bitcoin is an utterly politically independent cryptocurrency having a peer-to-peer network and blockchain. Undeniably, bitcoin is one of the most famous cryptocurrencies with an optimal market cap and a fascinating market value. However, the store value of bitcoin is exceedingly volatile in contrast to other investment assets and trading instruments.
Undoubtedly, you can avail profitable results from the bitcoin’s volatility in bitcoin trading and investment progression, but volatility still demonstrates a risk factor. Moreover, the store value of bitcoin is exceedingly fragile due to its decentralization aspects.
Bitcoin achieves decentralization only due to blockchain and a peer-to-peer network alongside proof of work. Blockchain is a public distributed ledger with compelling characters such as immutability, decentralization, DLT, and many more.
All the more, every peer-to-peer network contains a blockchain copy which ensures that sender and receiver can process a transaction without the support of government authorities. So if you want to get profitable results in your bitcoin trading journey, login here to check more good results. Here are some of the critical factors which determine the volatility of bitcoin. So without wasting any further ado, let’s have a glance at the facts.
Is bitcoin’s volatility a benefit for bitcoin traders?
Bitcoin is one of the greatest volatile investment assets and trading instruments. The prominent reason behind this fact is that bitcoin’s market value is very fragile. Nevertheless, despite such volatility, bitcoin traders are availing results from bitcoin trading.
The prominent reason behind this fact is that the fundamental of bitcoin trading is to buy low and sell high, and bitcoin’s volatility offers ample chances to traders to buy low and sell high. So, to sum up, yes, bitcoin’s volatility is a benefit for the bitcoin traders.
Key factors determining bitcoin’s volatility
Since bitcoin is a decentralized currency, there are significant factors that determine the volatility of bitcoin. Here are a few of the excellent factor which determines the store value of bitcoin and bitcoin’s volatility.
Supply and Demand
Supply and demand do not merely regulate the volatility of bitcoin but many other assets as well. However, in bitcoin’s case, it is the primary factor that determines the volatility of bitcoin. To acknowledge bitcoin’s supply scenario, you must know that bitcoin miners can only mine a limited number of bitcoin.
All the more bitcoin miners have mined almost 90% of bitcoin units in just 11 years. The last 10% of bitcoin will last up to 2140. Supply and demand demonstrate the store value of bitcoin.
If the supply of bitcoin is less, the store value of bitcoin is correspondingly less as there is significantly less demand for bitcoin. But, surprisingly, demand impacts the store value of bitcoin to an exceeding extent as there are 21 million bitcoin miners can ever mine.
Bitcoin mining is adding new bitcoin units to circulation, and bitcoin mining is correspondingly a decentralized process. However, due to the decentralization of bitcoin mining, the supply of bitcoin is uncertain, and the demand for bitcoin is correspondingly very uncertain.
As mentioned ahead, bitcoin mining generates new bitcoins by verifying a set of transactions. As a result, bitcoin mining determines the volatility of bitcoin, but it does not have a serial connection with the market value of bitcoin.
However, the fact might surprise you that the higher hash rate of bitcoin mining or the more incredible difficulty of bitcoin mining demonstrates an incline in bitcoin’s store value. The prominent reason behind this fact is that if mining bitcoin is complex, the supply of bitcoin will automatically decrease, leading to an increase in the store value of bitcoin.
Crypto regulation and mutation in policies regarding cryptocurrency determines the volatility of bitcoin. For example, newly, China proclaimed a cryptocurrency crackdown in the country. Cryptocurrency crackdown in China crashed the entire cryptocurrency market. As a result, there was a massive decline in the store value of prominent cryptocurrencies like bitcoin and ethereum.
The prominent reason why china announced a cryptocurrency crackdown was bitcoin’s volatility and energy consumption of bitcoin mining. According to some rich sources, some countries are also considering coming up with strict crypto regulations.
The portion mentioned above is everything you should know about the key factors regulating the volatility of bitcoin.