The volatility is nothing more than a direct reflection of the fact that getting money into and out of Bitcoin is terribly inefficient.
Drivers of inefficiency include: lack of trust in exchanges, fear that they will get hacked, their bank accounts shut down, or suddenly go out of business; lack of confidence that sending funds to an exchange can be transacted upon in a predictable timeframe.
Basically, the price shoots up until it is so high that people wanting to sell but are hesitant become willing to take those risks to capture a big reward. Then it crashes so low that people wanting to buy but are hesitant become willing to take those same risks. It will zigzag continuously until we get to a point where all market participants can be confident about their ability to trade one direction or another whenever they so desire and without a bunch of exchange-related uncertainty and risk.
Drivers of inefficiency include: lack of trust in exchanges, fear that they will get hacked, their bank accounts shut down, or suddenly go out of business; lack of confidence that sending funds to an exchange can be transacted upon in a predictable timeframe.
Basically, the price shoots up until it is so high that people wanting to sell but are hesitant become willing to take those risks to capture a big reward. Then it crashes so low that people wanting to buy but are hesitant become willing to take those same risks. It will zigzag continuously until we get to a point where all market participants can be confident about their ability to trade one direction or another whenever they so desire and without a bunch of exchange-related uncertainty and risk.
BTC's value is correlated with its usage and popularity. There is wide debate about what BTC's future will look like. That is my opinion of what is the main driver for volatility. I think transactional efficiency and trust is only part of that discussion.
The long term value for BTC is uncertain, just like private facebook shares were uncertain when Zuckerberg launched facebook in the early years.
I want to highlight that another big part of the discussion is whether BTC will enter a deflationary spiral when total supply hits 21 MM. Worry about what happens later makes big time investors stay away.
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