Volatility in investment assets is common, since over time they go through different contexts that shape their operation. Bitcoin has not yet found its volatility index that correctly measures its fluctuation, since the cryptocurrency is still in its infancy. in a stage of growth like all assets at the beginning of its financial activity.
The value of Bitcoin has always been unpredictable. The cryptocurrency has had a very rapid growth that has raised it to $57,000 in February 2021. It should be remembered that in 2013 the cryptocurrency passed from $15 to $266 before falling back to $50. In 2018, the price of it reached to $20,000 and then to $6,000 again. Which has made it an unpredictable asset, but attractive to several investors.
We tell you some of the reasons for its fluctuation:
- News from the media.
Like any new asset, there is a lot of speculation and misinformation about how it works. Blockchain and Bitcoin technology have had a huge impact on the modern world and on the traditional economy. Political, social, economic events and business decisions have an impact on the conversation that is generated around cryptocurrency. Elon Musk's decision consolidated Bitcoin as a safe investment asset and boosted its growth. new all-time highs. so Likewise, the fact that different regulatory institutions within the countries position themselves against Bitcoin makes much of the population panic and prefer to move away from the cryptocurrency; however, since his By design, BTC does not have to answer to any banking or government authority, which has made its adoption complex within most countries.
- Market demand.
As in any economic sector: if demand increases, the price rises; if demand goes down, the price goes down. This happens when investors, also called whales, sell their cryptocurrencies for liquid money to earn when the price is high. upward. The movements of these groups always affect the entire market, since they concentrate a large amount of BTC. On the other hand, the Bitcoin market is small, so the movements of its investors have a great influence on the rest of the users of the cryptocurrency. so In the same way, as in all assets, people have the autonomy to decide when to sell or buy with the prices with which they feel most comfortable. If many people sell their cryptocurrencies when seeing a high selling price, the price of these will fall.
- Political and economic factors.
Although it is a decentralized currency, the activities of its external environment have a great influence on the world of cryptocurrencies. When such a factor threatens the cryptocurrency, the price of the cryptocurrency will drop. or it will rise. Low trust in government institutions and poor financial decisions cause more people to want to trust a decentralized system that does not answer to any institution. Political regulations or merchants not wanting to accept Bitcoin are the most common events causing the price to fluctuate and it has failed to stabilize a definitive volatility index.