Why Does Bitcoin Goes Up and Down? – Know the Real Reasons
Bitcoins are growing in popularity. While others make the most of this digital currency to make financial transactions more convenient, bitcoins are also used by speculators who were looking at this cryptocurrency as a way to make money by purchasing bitcoins at lower prices and selling them at higher prices, which is similar to trading in global markets like Forex. They profit from bitcoin’s extreme market volatility and to understand this full well, it is important to answer this question, “Why does bitcoin goes up and down?”
Bitcoin fluctuate in relative to other currencies, just like how other currency’s valuation swung against the US dollar. The value of this virtual coin is constantly changing and there is no centralized exchange for it. Bitcoin has no ‘fixed price’. When it changes ownership from the seller to the buyer, the two parties agree on a particular price, which is usually based on the rate bitcoins are being traded elsewhere. In a nutshell, through transactions, the value of bitcoin fluctuates based on the law of supply and demand.
There are two main variables that cause bitcoin’s drastic movement in price, the market size and exchange volume. The market for bitcoins is still small, relatively speaking. This means that there’s less consensus on the price to the BTC. On the other hand, exchange volume pertains to the coins that are in play, if the volume is limited, people don’t take full advantage of the arbitrage causing different prices to exist on the different exchanges.
Finding an answer to the question, “Why does bitcoin goes up and down?” is definitely easy. Bitcoin’s price fluctuates due to numerous factors, but heavily relies on the law of supply and demand. On the other hand, by understanding how bitcoin’s system works fully, it is more advantageous to get into this domain given that knowledge and wise decisions, when combined, can bring lots of profitable opportunities.