fbpx
Connect with us

Cryptocurrency

Bitcoin’s Volatility Explained

gold and black round emblem

Since cryptocurrency was introduced in 2009, it has become a very controversial subject for both critics and supporters. One of the main reasons for crypto to be considered a speculative investment is its high volatility. You can’t hide the fact that some people want to join the cryptocurrency game for the possibility of becoming a millionaire overnight. Well, the truth is, you should always be ready for days like Wednesday! 

This article will further elaborate on the major factors affecting Bitcoin and crypto’s volatility. But before we proceed, let us go back to where history began. 

What is cryptocurrency?

A cryptocurrency is a form of digital currency which originated in 2008. During that period, the idea was still on a white paper and was first conceptualised by a mysterious individual or perhaps, a group of individuals masked under a pseudonym, Satoshi Nakamoto. It was officially launched in January 2009. This form of currency uses cryptography for security purposes. It also utilises blockchain technology – a distributed ledger that is transparent and has the ability to record all data as well as transactions made. 

How does cryptocurrency work? 

Cryptocurrency is acquired through mining. Users consider it as digital gold. It can be comparable to real gold for its store of value. Just like gold, its supply is limited and can be acquired through the use of mining rigs. Digital mining rigs come in the form of a computer’s central processing unit or graphics card, and also ASIC(Application-Specific Integrated Circuit) devices whose role is to compute complicated algorithms and mathematical problems in exchange for tokens. Every verified transaction is distributed to the so-called peer-to-peer network, whereas a computed problem is called a hash. A single computer is called a node. Each node stores the data and performs sharing of these data to other nodes. Every transaction is called a block and when passed from one network to another, forms a chain. This is where the rewarding of digital coins began. The first known and still considered the largest cryptocurrency is Bitcoin. 

From the beginning, Bitcoin is known to be volatile. Its value was previously unrecognised until it went up to more than $19,000 in 2017. But unfortunately, the high price was short-lived and went down again to $3,000 in 2018. 

It was April 2020 where Bitcoin reached an all-time high market price of $65,000. This sudden price increase has encouraged investors to try out cryptocurrency investments. However, no one is really certain as to whether Bitcoin’s price will remain high or will go down again in a short span of time. But as of the moment, Bitcoin’s price is still over $60,000. To start an investment and trade Bitcoin, most users start off with a beginner-friendly and trusted website like Immediate Edge.

What is volatility? 

Volatility is simply the opposite of stability in terms of price. Because Bitcoin has a limited supply and lack of central authority support, being volatile is one of its typical characteristics. 

What makes Bitcoin so volatile?

Numerous factors can affect Bitcoin’s volatility. 

For instance, China’s banning cryptocurrency in their country, plus the decision of Tesla to not accept Bitcoin as a form of payment, has driven the movement of its price. Then comes Elon Musk’s announcement to invest billions worth of Bitcoin has again regained the trust of people in Bitcoin. Volatility is indeed a price to be paid for having no central authority and having a limited supply. 

Scarcity. Bitcoin is known to have a limited supply. Only 21 million bitcoins are made to exist, and 18.7 million were already mined and are currently under circulation. Although it is near its maximum threshold, the last Bitcoin is set to be miner until 2140. 

This factor results in the inelasticity of Bitcoin’s price. Due to scarcity, the rise of demand will never lead to an increase in supply. 

Decentralisation. No central authority or government has the power to intervene with Bitcoin’s decentralised network. This affects Bitcoin making its value unstable as compared to the fiat currency that is backed by the central bank. 

Newness. Bitcoin is known to exist for only over a decade, 13 years to be exact. It does not have much trading history and remains under the price discovery phase. Although it has already established itself as a new form of value, its terminal value is still uncertain. 

How do you deal with volatility? 

Three words: Get used to it!  If you are new to this type of business, then expect more price swings in the future. Instability and unpredictability are typical features of Bitcoin. This pattern has been evident over the last decade. Most investors solely rely on a high-risk, high-reward as one of their investment rules. 

As all investments are risky, and so Bitcoin is. Long-term investors are familiar with this matter. What they usually do is play the long game and diversify their portfolio in order to minimise the risk and to gain a more consistent result. 

Although volatility is associated with huge losses, most investors do not see it that way. As a matter of fact, the big players aim over volatility and see it as an enormous opportunity. 

Nowadays, not only retailers but also big corporations and prominent persons dominate the cryptocurrency world. Its newfound legitimacy is due to its growing institutional adoption.

Stanley Gatero is a writer at Disrupt Magazine. He covers topics concerning technology, entrepreneurship, news, and sports. He is an avid traveler.

Advertisement Become A Crypto Expert

Join Disrupt Magazine

Become A Disrupt Contributor

Most Disruptive

Meatsmith Team Snowboard Canada Meatsmith Team Snowboard Canada
Press Release23 hours ago

Beijing 2022: Grass-Fed Beef Protein Bar Meatsmith Partners With Team Snowboard Canada

Meatsmith – Official Partner Of Team Snowboard Canada For Beijing Olympics 2022 Toronto, Ontario – Meatsmith is proud to announce...

Disrupt Prime Video3 days ago

Top 3 NFT Projects under 1 ETH | NFT Disruptors Podcast

A non-fungible token (NFT) is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger. NFTs can...

NFT7 days ago

Polly Kole, The Beauty With Gifted Hands Tycoon Of NFT Sculptures

In a society full of stereotypes, people clinging to appearance and disregarding one’s achievements is the magnificent Polly Kole stunning...

News4 weeks ago

Spider Man; No Way Home’, Crushes Box Office Estimates Generating A Mammoth $253 Million In North America.

After only 3 days in the cinemas, the latest and last Spidey outing disrupted the international market as the highest-grossing...

Cryptocurrency1 month ago

Nike just bought a virtual shoe company that makes NFTs and sneakers ‘for the metaverse’

Nike, the sportswear mogul, recently stunned the globe as it moved into the realm of the metaverse industry and blockchain...

QR code screenshot QR code screenshot
Diversity in Tech2 months ago

BTC did 62% more in transactions than PayPal this year

MasterCard and Visa have always topped as the runaway leaders; however, Bitcoin’s Lightning Network will soon disrupt this norm. Starting...

high angle photo of person holding turned on smartphone with tall buildings background high angle photo of person holding turned on smartphone with tall buildings background
Social Media2 months ago

How to Organically Grow Your Social Media Following In 2022

Instagram On Instagram, use Reels to reach new audiences and grow – find popular sounds and use them in your...

gold-colored Bitcoin gold-colored Bitcoin
Cryptocurrency2 months ago

Julio Domenech On How Banks Can Engage In Bitcoin in 2022

As cryptocurrency continues to become a popular trend in the US, many people are looking for an opportunity to participate...

Diversity in Tech3 months ago

Microsoft Teams, Incorporating New 3D Avatars And Virtual Meeting Spaces Before Mid 2022

Microsoft Mesh has always led as the future of Microsoft Teams meetings. However, Meta, the newly launched Facebook company, is...

Health + Fitness3 months ago

Stephen Campolo – How A Former Fat Kid Transformed His Body And Is Now Helping Others Do The Same

UPDATE: During a recent interview with Yahoo! News, Stephen revealed that he will be speaking at the next Disrupt Puerto...

Trending

Copyright © 2020 Disrupt ™ Magazine - Disrupt is a Minority Owned Privately Held Company

Disrupt ™ is the voice of Latino entrepreneurs around the world. We are part of a global movement to increase diversity in the technology industry and we are focused on using entrepreneurship to grow new economies in underserved communities around the world. We enable millennials to become what they want to become in life by learning new skills and leveraging the power of the digital economy. We are living proof that all you need to succeed in this new economy is a landing page and a dream. Disrupt tells the stories of the world top entrepreneurs, developers, creators, and digital marketers and help empower them to teach others the skills they used to grow their careers, chase their passions and create financial freedom for themselves, their families, and their lives, all while living out their true purpose. We recognize the fact that most young people are opting to skip college in exchange for entrepreneurship and real-life experience. This Podcast was designed to give them a taste of that.