Why is the price of Bitcoin and other cryptocurrencies so volatile?

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cryptography
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People knew that every cryptocurrency would be volatile, but they believe in the other benefits. There is a way to measure it using the volatility index, or for Bitcoin, BitVol. It may seem like it was the most important coin that has changed in value a lot over the past decade, but other cryptos have seen even bigger declines.

This year was one of them where we had a 30% drop and the highest point ever. This would never happen with the silver we use in everyday life or anything compared to gold. They are fairly stable, but at some point it would be necessary to switch to other means of payment.

It is difficult to determine the future value

Future value will only matter if it becomes part of our life to spend it on many products and services. This is best explained if we take the term store of value, which means that the asset can be used in the future with some predictability. You should be able to exchange it for services or goods.

With Bitcoin we have signs that it can be used this way but many countries still don’t know how to adapt to it. Of course, banks are also one of the factors we don’t have digital currency for. This is also one of the reasons you shouldn’t predict the future because you can’t do it with something that has really high ups and downs. Get more information here:

Great holders

Even with so many people involved in the market and millions of investors, in almost every crypto you have individuals who are considered whales. These holders hold a large portion of the currency, which can have a big impact on the market if they start selling. They are not even sure what would happen if they tried to trade for fiat because the value has increased a lot.

In most cases, withdrawal takes 24 hours or more when you want to convert to fiat. A lot can happen during this time, and they are not willing to risk it. It may seem that now the people are running the game instead of the government, the big companies that own thousands of coins are in charge.

News has an impact

Although the biggest problem we have with crypto is extreme volatility. Anyone can bother if they’re lucky. Whether it’s good news or bad news, it will rock the coin and make others think twice before selling or buying. On a larger scale, government statements and geopolitical events also have an impact.

When Tesla first opened its doors to crypto payment options, everyone was happy that we had such a big name trying to make a change. But, after the benefits it presents, they made it worse by no longer accepting cryptocurrency as a payment option for their vehicles. There was news about the bad benefits it can bring to illegal activity, which brings back investor confidence.

All this bad press only benefits people to learn more about it, but in the long run it gives some kind of fear factor to this big name who might be trying not to be the best fit. So while some of the news is accurate, it is essential to see the big picture and check out the downsides of the money we are using today.

High level losses

There was news of big losses every year so it must happen to someone given the volatility of Bitcoin and the like. From the guy who spent 10 BTC on pizza worth $ 600,000, to the big companies that had mismanagement when selling their product for crypto, there is a kind of fear in doing these changes and adapt to BTC.

Lots of companies have learned from their mistakes, and we still have a lot of them that operate with regular money and cryptocurrency. Of course, there will always be those two people who want to implement it for everyday use, but most are scared because of the volatility.

Third World countries

Some of the biggest investors are from third world countries who have seen potential in BTC due to their bad situation with their currency. When they have high inflation, they turn to Bitcoin because it is less volatile when you compare their currency to the USD. They would make a loan when they needed it in crypto and exchange it for USD if necessary.

It can also be used against them when you are earning a lot of money for a smaller investment. Their market can be easily manipulated by outside investors using debt instruments. They have a lot of mining facilities, so there is no chance that this kind of manipulation will stop in the near future. The only way is to bring some kind of stability where it will be more difficult to make a profit using this method.

Tax influence

The problem with volatility is that it can be caused by a certain action and have a positive and negative impact. The IRS has issued that BTC is an asset for tax purposes. The good thing is that someone like the IRS or the Internal Revenue Service recognized Bitcoin, which would have been unthinkable five years ago.

But, because we are talking about tax, there are more negative effects for users. The first is how difficult it becomes for us to use it to pay on the internet. It is not the treatment that is the problem. This is the market value at the time of payment. You will need to save it for each transaction.

In addition to impacting small users, with the start of IRS involvement, we can expect more stringent regulations to influence businesses. These regulations are usually firm at the start when they are difficult to control. There are still a lot of changes to be made so it is not yet something that is going to crash the market. We have to have taxes for many purposes, but in this crypto state it’s not very manageable.


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