Cryptocurrency Verification: Why is Bitcoin Price So Volatile? MintGenie explains

Cryptocurrency Verification: Why is Bitcoin Price So Volatile?  MintGenie explains


About six years ago, the price of one bitcoin was hovering around $580 (roughly the equivalent of R40,000) in August 2016. Not only that, it sold for about $11,200 (approx. R817,000) in August 2020 before rising to over $37,600 (approx. R28 lakh) in August 2021, registering a massive growth of about 236 percent in just 12 months.

Now, in September 2022, it’s now down to $20,210, marking a massive 46 percent drop in just over one year.

Investors often wonder why the price of Bitcoin has fluctuated so sharply. The unpredictability of the price makes it appear “unreliable” as an investment among a section of investors. But to understand why its price has changed so quickly, we must know the reasons that drive this cryptocurrency and most importantly – the demand for it.

Read More: Cryptos to NFTs: Are These New Investment Opportunities Worth Considering Now?

Reasons for height

One of the main reasons for the huge jump in its price is that established institutions such as pension funds and mutual funds are now beginning to invest in it. Until 2017, individual investors were investing in bitcoin. But with increased acceptance, many billionaire investors and financial institutions are now open to Bitcoin and its future. For example, JP Morgan has started offering Bitcoin money to its wealthy clients and has also created a digital currency JPM Coin for making payments using blockchain technology.

musk effect

When electric car maker Tesla headed by Elon Musk bought $1.5 billion worth of bitcoin in February 2021, the price of bitcoin reached an all-time high of $44,000 (almost) R33 lakh). Subsequently, Musk was slow to allow Tesla to accept payments in bitcoin by expressing environmental concerns that bitcoin mining uses large amounts of electricity. However, it was announced back in July 2021 that Tesla would likely accept Tesla payments in bitcoin, driving bitcoin prices once again.

Read more: Here’s how to trade the bearish flag pattern in crypto

greater acceptance

Sellers and merchants have also started accepting bitcoins. Paypal, Starbucks, BMW, Expedia and Zinga are now facilitating bitcoin transactions. Any positive statement from central banks in favor of blockchain technology is likely to tip the balance in favor of bitcoin.

El Salvador became the first country in June to accept bitcoin as legal tender as of September 2021. In fact, hardly any institution or country is alienated from blockchain – the technology behind the creation of bitcoin.

Therefore, bitcoin prices have recently jumped to new highs. Some have invested in her out of fear of losing her, while others remain unsure of her future. Whichever side a person is on, it is advisable to exercise caution before committing large sums.

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