Why is Bitcoin Price So Fluctuating?steemCreated with Sketch.

in #bitcoin7 years ago

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If you are an active trader in the world of digital currency and indeed take advantage of extreme price movements Bitcoin to seek profit, Bitcoin prices are fluctuating of course brings its own happiness. But it's different if you use Bitcoin as cash or fiat money. If you redeem your million dollars into Bitcoin and intend to spend it on an online site, you certainly do not want your Bitcoin value to decrease as Bitcoin prices suddenly plummet. Bitcoin you have now can not pay for the Hard Disk 1 Terra you want and eventually you have to buy extra Bitcoin to cover up the shortcomings.

Fluctuating Bitcoin prices are already a daily complaint of Bitcoiners around the world. Actually what factors affect the rise and fall of Bitcoin prices?

The small volume of Bitcoin is spread over the network

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As we have seen, the price of Bitcoin is determined in absolute terms by supply and demand. If many buy Bitcoin, then the price will go up and vice versa. The volume of Bitcoin in the system is still relatively small, ie 14.8 million Bitcoin (as of November 2015, based on graphs in blockchain.info). This is certainly far different with the total US dollar in circulation, ie 1.34 trillion USD (as of September 2015).

It should also be noted that not all Bitcoins are actually transacted by the user. Most of the Bitcoin is lost in the system due to several factors, one such as the case of losing a private key or hard drive that stores 7500 BTC in it. When viewed on this site, Bitcoin worldwide market cap is still slightly below the 5 billion USD mark. Since the volume of Bitcoin circulation is still small, when someone buys or sells Bitcoin in a big price, then the price will move in the extreme. Bitcoin price volatility will be dampened if more and more Bitcoin users are scattered and the number of Bitcoin is also higher.

The situation where more Bitcoin trader than Bitcoin user

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Bitcoin users today are mostly just traders who play Bitcoin like stocks, not Bitcoin users who actually use Bitcoin to transact or shop for their life needs. Understandably that being a Bitcoin user is somewhat difficult because the merchant receiving Bitcoin is still relatively small. It is likely that you can not buy an apple at the nearest supermarket with Bitcoin you have. And since Bitcoin technology is complex, not everyone can 'consume' Bitcoin as easily as a programmer. Therefore, more people choose to be traders and hoarders (people who buy a lot of Bitcoin when the price is still low and kept in hopes that the number will exceed $ 1000 / Bitcoin) in order to make a profit.

Impact, when Bitcoin price increases, they will sell Bitcoinnya simultaneously, so the price plummeted again. The "Panic Sell" and "Panic Buy" conditions often occur due to different perceptions and this is what causes the Bitcoin price to be very volatile.

News spread globally

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Since Bitcoin is the first digital currency with blockchain technology that has the potential to change the current financial system of the world, Bitcoin certainly gets a lot of attention from various global media. From being used as a transaction tool on dark sites like Silk Road, transacted in the vague MtGox market with its customers' billions of dollars, until governed by strict government regulations, Bitcoin tends to be more often forged by bad news.

But in the year 2015, blockchain technology that drives Bitcoin also increasingly ogled by the world's top banking institutions such as Citibank, AXA and Commonwealth. Good news such as NASDAQ which began to work with Bitcoin, Microsoft and Rakuten companies that received payments of Bitcoin, to news of presidential campaigns in various countries that received donations in the form of Bitcoin. Cryptocurrency now can no longer be underestimated. The world is getting ready to move toward a more sophisticated, cheap and efficient financial system.

Ordinary people who do not really understand about Bitcoin become very affected by various positive and negative news spread by the media. While people who use Bitcoin as a trading tool without realizing their original potential as world currencies, will make the news as the basis of their trading decisions. Say for example, one day Bitcoin is declared illegal in Indonesia or Mt Gox case repeated and now hit CoinBase. Of course people will sell Bitcoinnya at the same time because of fear and eventually the price of Bitcoin dropped. Or maybe there is good news like Amazon that accept Bitcoin payments or the desire of world investors to move all of its assets to Bitcoin. Of course Bitcoin prices will skyrocket high.

Investment Fraud (scam)

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Not a few people are allocating their assets in the form of digital currency because it is promised by certain companies that they will earn a profit many times over. Tempted by an attractive offer, some investors put Bitcoin on an investment company's website without digging up more information about the company. In the first month, Bitcoin owned them five times more, and in the second month they put more Bitcoin in the hope of getting more profit in the third month. The investors bought Bitcoin up to more than 1 billion rupiah per person, and they continued to buy Bitcoin until finally the world's Bitcoin prices increased. With large capital, should the investors get profits abundantly. However, when investors intend to take their money in the third month, the site is suddenly inaccessible, and the company disappears without a trace. As a real example, you can see what's going on with MyCoin company in Hong Kong.

The result of this case is that they will resell the rest of their Bitcoin unexpectedly when bad things hit Bitcoin because they really do not really understand about the potential of Bitcoin as the world's currency. They only buy Bitcoin because tempted by the profit offer from the investment company. It is also possible that the investors will spread the word that Bitcoin is a form of scam that needs to be avoided, whereas what causes a loss is a particular company rather than the Bitcoin system itself.

Bitcoin is 'hacked' and taken away by others

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Investors and Bitcoin new users plunge into the world of cryptocurrency will be very easy to fear if they hear of anyone losing Bitcoin for being hacked. Please note beforehand that your Bitcoin may be lost if you do not keep it up properly, for example by saving your Bitcoin in a trade exchange rather than in your personal wallet; Entrust your Bitcoin in scam companies that promise high profits; Or use the same password for your Bitcoin Wallet with your social media account. If you do not secure Bitcoin in the proper way, then it is not impossible if your Bitcoin is stolen.

Actually cases like this are a personal mistake. Someone who can secure his Bitcoin by storing it in a cold wallet or paper wallet, for example, and provides layered security like google authenticator, email verification and pin sms, it would be very difficult for his wallet to be hacked by other users. Unfortunately, there are still many people who store Bitcoinnya in less reliable companies that can at times close and bring their money away. Of course you still remember what happened at Mt. Gox.

There are still many factors that cause the price of Bitcoin to be so volatile, but in my opinion, the five factors above are the five main reasons behind the Bitcoin price movement. As long as the five things are still going on, then the Bitcoin price will continue like this. Being a Bitcoin user, you must be prepared to risk your Bitcoin turning into a $ 1000 / Bitcoin price as early as 2014, or returning to the $ 1 price as when the new Bitcoin was created.

No one can guarantee that Bitcoin will always make a profit, but everything goes back to each other. You see Bitcoin as something profitable because of what? Is it because of the price? Or because of its ability to send money for free anywhere without fear of being stolen by a third party? To me, Blockchain and Bitcoin technology is an invaluable innovation, and if at least one person in the world besides me is looking at Bitcoin in the same way, then Bitcoin, like gold, will continue to be valuable

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