Factors that cause the high volatility in bitcoins

Most people are always scared away from investing in bitcoins by its high volatility. It is crucial to understand the factors that make the prices of bitcoins to be highly unstable. You should understand that the price of bitcoins is also affected by the forces of the market like demand and supply. Higher demand for bitcoins results to a higher price while a decrease in the demand lowers the market price of bitcoins. You can browse this web site for additional information on bitcoins.

The value of bitcoins is highly volatile compared to the conventional payment methods. This is because of the small market size that bitcoins have which allows a less amount of money to prominently change the price of bitcoins. This article discusses other common factors that increase the volatility of bitcoins.

Bad press

You should note that the news from government agencies concerning the possibility of future regulation of the bitcoin trade discourages people a lot. Any transmission of negative news concerning bitcoins to the public scares away potential investors limiting the growth of bitcoins. When people get scared, traders in the market reduce hence the value of bitcoins drops significantly.

Fluctuations in the perceived value of bitcoins

This factor limits the amount of bitcoin that can be generated. This limit affects the size of profits one can realize from bitcoin trading. As a result, most investors tend to allocate fewer resources into bitcoin trading.

Cases of security breaches

Organizations that disseminate information help to build or break the image of bitcoins. Over recent years, a lot of news about security breaches has been transmitted. This causes the investors to shy away from investing into bitcoins using their hard earned money. This lack of buyers reduces the value of bitcoins present in the market. It is advisable that bitcoin developers should publicly explain the vulnerabilities so that they can get people that have the ability to solve such problems.