Bitcoin is a path-breaking digital cryptocurrency that changed the dynamics of crypto trading. It launched around twelve years ago, and since then, it has emerged as one of the most reliable and profitable cryptocurrencies. It is a reward for miners, and it can also be used for availing other services, currencies, and products. The value of Bitcoin in terms of dollars changes every day, and the difference can be big in a matter of seconds, which makes Bitcoin a volatile cryptocurrency. In this article, we will talk about Bitcoin’s volatility factor in detail, and we will also talk about the benefits of volatility.
Why Is Bitcoin So Volatile?
As I said before, you can use your Bitcoins to purchase physical goods and avail of other services. However, many investors and traders do not use Bitcoins for them, and they use Bitcoins for investments. They keep buying and selling Bitcoins, and that is why the price of Bitcoin is volatile. The fluctuation in the price of Bitcoin is more, and it has disadvantages and advantages. The volatility is more than any other physical currency, and there is a lot of speculation around the price of Bitcoin, which makes it even more volatile.
What Are the Main Factors That Make Bitcoin Volatile?
As I said before, Bitcoin has a very high volatility rate, and it is evident in the price change. Various factors contribute to this volatility.
- News: As we all know that negative publicity can hurt any product, company, or currency, and that is the case with Bitcoin too. There is news that is generated daily, which scares the investors, and as a result, the price changes continuously. Even in the past, there have been several incidents where Bitcoin received negative publicity, and that can be seen in its value. There is competition between Bitcoin and fiat currencies, and any bad news can make investors second guess their moves.
- Uncertainty: There are speculations that Bitcoin might vanish one day, and this uncertainty over the future of Bitcoin reflects in its price. Many logical facts also indicate that Bitcoin’s future is uncertain, which is why new traders are unsure about investing in Bitcoin. Traders and investors who already have their money on Bitcoin also try to sell Bitcoin, which is why the price changes.
- Security: This is no secret that Bitcoin has become a victim of cybercrime several times, and this makes traders think about the security factor of Bitcoin. It becomes tough to invest money in something that is not secure and has a history of security breaches. So, this is one of the biggest reasons behind the volatility of Bitcoin.
- Fear: There have been multiple incidents where high-profile celebrities and investors have lost a chunk of money in Bitcoin. These types of incidents confuse traders about Bitcoin’s potential, which is why they shy away from investing in Bitcoin. This factor has a double effect on the volatility of Bitcoin.
- Inflation: Bitcoin is used as a currency for multiple purposes in many countries across the globe. The physical currencies in these countries face high inflation, which inflates Bitcoin too. That is why Bitcoin witnessed a high volatility.
How to Benefit From Bitcoin’s Volatility?
Bitcoin’s volatility is a huge factor, and since Bitcoin is a risky affair, it becomes more important for traders to capitalize on this factor. There are various ways in which you can benefit from the high volatility of Bitcoin. You can start with Margin trading, as it is very profitable. However, you should know that it is also a risky option. If you are looking for something less risky, then there is always an option of selling other cryptocurrencies for Bitcoins. Most trades rely on this for making money. If you are looking to make huge profits without any risks, you can opt for dollar-cost-averaging, as it does not involve any risk. This is the best way of taking advantage of Bitcoin’s volatility. So, these are the three ways to benefit from this risk factor. Apart from that you can also choose an automated platform like Bitcoin evolution to make profit.
So, that was everything you needed to know about the factor that makes people doublethink their decision to invest in Bitcoin. Volatility is a huge factor, and now that you know why it happens, you can keep these factors in your mind when you invest in Bitcoin. However, there are also multiple ways of taking advantage of volatility, and I would suggest you use them for making profits.