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My name is Rhys, a first time dad blogging about my adventures and experiences of being a parent. [email protected]

Why does bitcoin’s price fluctuate?

(Adobe Stock)

We see the price of dollars fluctuate at a very fixed rate, and it is because the government is controlling the value. When you compare the value of a currency with different countries, it will show a minor change in currency. It also depends upon the country’s economic growth, but what about the price fluctuations of bitcoin where no owner or manager controls it? So Bitcoin Storm can distinguish why does the bitcoin price fluctuate so much in this digital world?

The objective of bitcoin

You all know about the story of fiat currency; if you don’t, I will briefly explain it here. The people were faced with so much trouble exchanging things and services before the invention of fiat currency. Still, when fiat currency came, everyone could measure the value of each product and service. There was also a need for an institute or government that decided the value of a single paper note. But one person who realized that this currency has a lot of issues such as high transaction cost, low processing speed, conversion fees, not globally use, and control of other people then thought about the currency that could solve all these issues, and it is known as bitcoin now. Bitcoin has no controller who will set the price, but the people or users of bitcoin will decide the price according to their transactions.

The role of demand and supply in bitcoin

You know that the country’s central bank controls the value of the paper currency by restricting the supply and increasing the supply of paper currency. But the demand and supply of bitcoin depend upon the belief system of the bitcoin users, and when all the bitcoin users start selling bitcoin, then the value of this currency will become zero. That is not possible. When people get trendy positive or good news regarding bitcoin, they start buying, and the value starts rising, and when they get bad news, the price starts dropping because of rapid selling. So the supply of this currency is limited, and the demand significantly affects growing or going down.

Bitcoin trading also effects

Bitcoin trading is becoming popular these days because people are finding new ways to make money in a short period. Nothing is better than bitcoin to make money online in a short period using the right trading skills and experience. Bitcoin trading means buying the bitcoin with some prediction to rise in some time so as after rising the price, they can sell and make a profit. But it is risky and volatile, and some big investors invest huge money simultaneously in bitcoin, which gives excellent high prices. People also spend more and more money to make a profit. Still, the value starts dropping when they withdraw the price at a profit.

Trending media influence a lot.

Now people’s decisions purely depend on the media channels such as Instagram, Facebook, YouTube, Twitter, Google research, etc. These viral videos or influencers in the cryptocurrency force their followers to make an instant decision by creating FOMO (fear of missing out). According to the news they hear or read, people start buying or selling bitcoin. These viral videos around cryptocurrency influence a lot, whether wrong or good. 

In India, there was news that bitcoin would get banned, and in fear of banning bitcoin, people started selling and withdrawing their money from this currency, and the price of the bitcoins started dropping. However, Bitcoin has not been banned in India but is restricted by the government for specific reasons. 

Belief systems also fluctuate.

Everyone has a different perspective about bitcoin according to their knowledge and experience and makes decisions according to their knowledge. According to their knowledge, many people will say you are good about the bitcoin cryptocurrency, and some will say you are wrong about it because they read, heard, or realized that it would make you poor because it is so risky. If you start believing it, you will start buying or investing in bitcoin, and the more people believe, the more the value of bitcoin will be. But if there is doubt in the mind of existing bitcoin buyers, they will start selling in fear that it will create a price drop situation.