By market, capitalization Bitcoin has become the world’s largest digital currency, and many investors have generated excellent returns too. However, bitcoin is seen to be quite volatile, and that means the price of bitcoin has been quite fluctuating and that also makes it difficult to function as a currency sometimes. Numerous factors have been pointed out by market analysts explaining what can be the cause behind the volatility of bitcoins if you want to know about it read this article further.
Factors that might cause the bitcoin to be so volatile
- Liquidity: lack of liquidity is one of the major factors for the volatility of bitcoins. Liquidity is the number of sellers and buyers that are interested in or support the market or asset. A good amount can be bought and sold when the liquidity is high, and then there are no disproportionate results on prices. However, cryptocurrency has very low liquidity, and there are not sufficient buyers or the sellers.
- News and media: news and media can have a major impact on today world and fake news are also spread very easily. Therefore misinformation about cryptocurrency can be easily spread and therefore the prices are violently reacted.
- Regulation: in the industry of cryptocurrency, there has been great progress when it comes to regulations over the past few years. However, there are still many businesses that are unregulated, and consumers get no assurance when they invest in them.
These were a few reasons that make the bitcoin volatile. People are still new to the idea of cryptocurrency and need to know questions like how to trade bitcoin futures on deribit? Etc. When people gain full knowledge about bitcoin then only they will start investing in it, and that can help in making bitcoin less volatile.