If the entire digital currency market can be summed up in one word, then that word would be “volatile.” Looking at the fluctuation rate in the value of bitcoin indicates this in stark reality. From about $6k at the beginning of November to $20k towards the ending of December and them back to $8k in February.
It has been an unbelievable ride with lots of jumps and bumps along the way. Here are some key factors that cause the high volatility in the market.
One of the major factors that contribute to the crashing down of values is the introduction of new regulations. As governments and central banks start to catch up with the digital currency phenomenon, a lot of them are considering introducing new, tougher rules into the market. The tougher the rules, the higher chance of drastic declines.
The more people buy into digital currencies (as both a means of financial transation and an asset), the more difficult it will be to overlook. As more retailers start providing their clients with the chance of making payments with digital currencies, the use of digital currency will continue to increase. When and if big players join the list, expect to see the value of digital currencies skyrocket.
New trading platforms and digital currencies are popping up regularly just like devices such as ATMs. The better and easier the technology, the more valuable its market will be.
When it comes to digital currencies, Bitcoin is not the only coin in the market. There are now lots of alternatives that offer marginally different features and strengths. When it comes to value, competition is a double-edged sword – helping to expand the market at large and also dilute the impact and influence of a particular digital currency (albeit, bitcoin is still the king of digital currencies)