What makes crypto’s price so volatile?

Bitcoin and cryptocurrency, in general, can be an investor’s worst nightmare at times due to the price volatility that continues to be experienced on a regular basis. At any given moment, the price of a digital asset can fluctuate and change without any prior warning. It can go to a new high at any point, however it could easily go to a new low, too.

However, despite all of the problems that the value of the virtual currency can provide at times, it would seem that crypto investing is still as popular as ever and something that many more around the world are continuing to buy into as adoption rates continue to climb globally.

But, why does Bitcoin’s price continue to increase and decrease so often and rather randomly at times?

Why does crypto see a price rise and drop?

Unsurprisingly, there are a number of different reasons that will have an impact on what the price of the cryptocurrency will be on any given day, although the media can certainly play a major impact.

Indeed, crypto is unlike many other stocks that are available to invest in, as it is purely speculative and is purely based on the amount of confidence that is being shown in it at any given moment. If the general consensus is positive, then investors can expect the price to climb. If it is negative, then a decrease can be expected.

Of course, there are other factors that can have an influence on the price of the cryptocurrency, including regulations and potential laws that may be discussed or proposed within certain countries. If a nation indicates that they could be prepared to ban crypto, then the price will typically see a decrease be experienced, whereas if they show a favorable approach to it, such as implementing regulation, then the price can soar.

Crypto gambling has also been found to have an impact on the price of virtual assets, too. A study by Thomas Conlon and Richard McGee in 2020 found that there is evidence to suggest there was a telling impact in the early days of crypto. Indeed, more and more have continued to play bitcoin casino online for all of their wagering needs as they have been able to experience benefits that fiat currency can not provide them with. These include security features, as well as simple advantages including faster transactions.

When speaking about why Bitcoin and crypto continue to fluctuate in price, Rhys Thomas of The Face had written: “Rises are mainly down to positive perception in the media. Some news makes a lot of people think ​’bitcoin really is the future! I’m gonna get some and/​or buy more!”

When looking at why decreases in price happen, it was suggested that the finite supply available – 21 million – had an impact, especially as around 19 million of them have already been mined.

Can the price of crypto be predicted?

Perhaps the hardest challenge a crypto investor has is trying to work out and predict what price the crypto being invested in will be able to reach.

Due to virtual currency’s highly unpredictable nature, investors are unable to track the price based on any historical or predictable data that is available. They simply have to go by the perception that the token has on the day and be prepared to make the decisions they need to as quickly as possible.

Naturally, there have been influential figures who have perhaps helped to increase the price after speaking out about virtual currency, therefore having a unique ability to try and manipulate the price in their favor, although this does not always work, especially for bigger coins such as Bitcoin.