It appears that bitcoin’s (BTC) value is on a rollercoaster ride. The digital currency’s share price rose to its record-breaking high of $19,346 last year. A few months later, BTC plummeted to $5,967 and lost over 69% peak value. The value has been shaky for a while now. It soars each month and plunges in the same breath.
Why is BTC volatile?
Bitcoin is a currency, but it is traded as a commodity. Currently, there is a limited supply of this digital currency and lots of investors and customers demand for it. The market forces are responsible for setting the share price of bitcoin just like gold.
Why is the crypto market going down?
- Bad Press: public perception of the currency is affected by headlines of crashes as well as negative statements by financial institutions questioning the validity of the currency. One example of this effect is the event in 2017 where the CEO of JP Morgan threatened to fire any worker that invests in bitcoin in his investment bank. The digital currency suffered a 6% loss in value immediately.
- Inadequate security: for bitcoin to gain stability, merchants, and consumers need a safe spot to store funds. Sadly, security issues are affecting the trust as well as bitcoin use. Some notable events happened last year when two exchanges were robbed of their funds. Cyber thieves have also stolen lots of money from crypto exchanges.
- Stringent government regulation: bitcoin is decentralized and has not central authority regulating it. This allows users to avoid regular payment processes. It is attractive to lots of users because it means zero inflation or the central It also attracts cyber thieves who love stealing without leaving a digital footprint. Governments have refused to adopt the currency because financial institutions and banks are concerned about its ability to promote laundering or commit crimes. Earlier this year, the finance minister of India said cryptocurrencies would not be recognized as a legal tender by the country. It will also discourage the adoption because of the widespread use in different illegal activities. Also, facebook requires crypto and bitcoin advertisers to pass through a stringent approval process. It also banned ads for initial coin offering.
- Delay in the ruling of bitcoin ETF by SEC: experts also believe that the approval of this fund could cause BTC value to skyrocket. The application was previously rejected due to the volatility of the digital currency. The delay has affected other cryptos as well, not just BTC.