Topic: Why is Bitcoin value more Volatile? (Read 4304 times)

This is really amazing Frequently Ask Question.

Q: Why is Bitcoin value more Volatile?
A: Bitcoin is an emerging digital currency. The demand and supply of bitcoin is changing in every second. So the bitcoin value is volatile more than other currency.

Less than $4 Bn is big? That is chump change.
Apple Inc is valued at more than 100 times Bitcoin's market cap and that is just one company.
So yes, the potential to grow is huge.

Bitcoin market is not big? For me it is quite different. Look at this chart: https://blockchain.info/charts/market-cap
And I don't think that volume of market brings stability.

The value of bitcoin is volatile because bitcoin is not tied to any country or subject to regulations.  It is also created by a man named Satoshi Nakamoto whose identity is still in dispute.

The value of bitcoin would really be volatile since it is a digital currency.  It operates independently of a central bank.

I agree with long-term stability, This is a time in BTC history that needs to be left to the true risk takers and entrepreneurs

Correct. sorry i means not stable if it compare to fiat movement price.

I means volatile here is the price yawn, and if the price go down, the price is will not significantly touch nowadays low price(if that whale not sell all their coins). the price is volatile if it compare to fiat.

All is depends on supply and demands.

Maybe you are wrong. That depends from the meaning you give at the expression "it will not be stable forever". If with that you mean that it will be always volatile because the reasons you give ongoing you are in big wrong. With time bitcoin will be more stable every day more. The amount of bitcoin is fixed and the demand for it will be increased (as it is told even from you). This will increase his price but not its volatility. The price can go down but far less and rarely than nowadays and in much more less than the amounts of nowadays. The tendency will be the increase of price and this is called appreciation and not volatility.

If with your expression you mean other meaning name it concretely to be understand without doubts and my explanations would be in vain.

I think it will not stable forever. it will more volatile when the demand is increase, because the supply is limited.

In my opinion, the following basic indicators make a cryptocurrency more volatile:

1. small market (Bitcoin is the biggest, but still small)
2. PoW based security model, because it tends to amplify price swings (basically: miners hold when price goes up, but sell when price goes down, the difficulty swings are the main reasons for this phenomenon)
3. a fixed supply, because there is no flexibility to react to demand swings
4. more short-term investors than long term investors
5. little usage, because usage usually stabilizes the price a bit

In some of these items, Bitcoin has made progress in the last years (1., 4. and 5.) while others are impossible to change (2. and 3.) because they are defining parts of the protocol. For these reasons, I basically expect the volatility will drop a bit more, but will never reach the stability of most state-issued "fiat" currencies.

No it is not true. Bitcoin is volatile because is an emerging digital currency. The demand and supply of bitcoin is changing in every second. So the bitcoin value is volatile more than other currency.

Very hard to learn this. Months and months of study and independent work in mining to find those above. Congrats to myself!

Sorry mate but it is very funny your thread. I don't understand what do you want with it. Maybe there even other factors that have impact on volatility of bitcoin but are casual and cannot be told before they happen. It is all that can be told.

until when infancy of bitcoin?

Although volatile, it's decentralized, which explains the reason it can be unstable. The thing about fiat currency is the fact that it's controlled by a 3rd party entity, meaning the value can be falsified in ways (like inflation). Bitcoin inflation doesn't exist. The price is on trading volume alone, and that's value is what the users make of it. Once currency fails, you're pretty much done for and all the money that once had value is worthless paper. imo, Bitcoin won't become worthless.

The reason why Bitcoin currently has a higher volatility than most other currencies is that it is still in its infancy and has a comparatively low market capitalization.

Also as of now only traders are holding much of these bitcoins hence they usually trade every day for some profit so these prices are very volatile.

bitcoin is considered as a commodity than a currency. Bitcoin is not tied to the strength of any particular country economy and these are under control of a any big institutions. But price is set by those who sell bitcoin so when there is a more rush by people to buy bitcoin for some reasons then price will move up very fast and it will come back also so fast after demand cool down.

that's because the market cap is still so incredibly small, as Bitcoin becomes more and more popular, the market cap is larger, the stability of Bitcoin will increase

Bitcoin's market size may be small, but it is substantially bigger than all the alts put together.
So somebody going for a pump and dump will be better off targeting any one of the alts.

Yes, I'm also waiting for mass adaption very badly.
Till then I'm increasing my stock of bitcoins.
The prices are always controlled by whales and those rascals always play with our money.

Currently major wealth of bitcoin is limited to a few hands only.
So they try to manipulate the prices and creates pumps and dumps.
But after mass adaption in future,  the prices will become stable and we will see the true price of Bitcoin.

Only experts can make more money from this day trading not the new users. So one should be careful about the trading.

Well that too, since the market is so small and easy to move, Bitcoin is pretty much a safe haven for speculators. They know exactly what to do and how to move the market in order to maximize their profits.

However, looking at the Ethereum pump at the moment, it seems that all of the speculators at the moment are in the ETH/BTC market.

In economics it is named 'supply and demand theory'.However, when the volume of BTC emission is big enough there will be many players in the market so any individual or group of individuals will not be able to effect the price.If the price volatility goes down, big investors and big funds will be willing to enter the market.

fluctuating price of bitcoin is proportional or in accordance with market demand,
if more people are buying, the price of bitcoin will rise, because the stock of orange reduced

Not only that, currently most of the bitcoins are with day traders they won't allow prices to stabilize otherwise their profits will go away.

It's simple, it's too small at the moment. The marketcap is too small and order books are too thin. Today, a 1 so called whale is enough to move the price up or down by $20, with 1 sell or buy.

Now imagine if Bitcoin marketcap was 10 times higher or around $30 billion, well to move the price by $20 it would be also 10 times harder.

i think many , when talking about stability they refer principally to the minimum fluctuation, a 1-5% at max instability,  should be considered "stable"

bitcoin is also more unstable than fiat because it is tied to fiat, usd isn't tied to anything for example...

It can never be stable as in ... stable. Nor can a fiat money. The money managers (central banks) can try, they can say that they try, but they can't make it stable. There are market forces. Anyway, currently they say that they don't try to make them stable, on the contrary, they say that they want a 2 percent devaluation per year, measured with a hopelessly inadequate measurement technique.

The volatility comes from the fact that the value is based on speculation, whether you speculate that value will go up, down (believe in the central bank's projection), or flat. If you think you can buy any specific thing next year for the same amount of dollars as this year, you also speculate.

Relative stability will come from the different speeds people react to the changing value. Some people don't care, they have business to do, and holding a cash balance is part of doing business. So if a lot of people react slowly, the money value will be more stable. Almost nobody chooses bitcoin to be that business related cash balance for the time being, hence the relative unstability.

Fiat money types are obviously not stable, just look at what happened to the yuan, the swiss franc, the yen, and basically all the smaller fiats. That does not mean that the dollar is stable, that is only a dollar centric view. Seen from the yen world, the dollar has risen. But on a day to day basis, it seldom moves more than 1 percent.

Also it's status is not tied to the strength of any particular economy, and it isn't under the control of any central bank and prices are set by purely on demand and supply. As of now most of the bitcoins are under traders control, they want to make a profits so they will trade every day. This will cause prices to fluctuate more. If any government or media gives some good news about bitcoins then every one will rush to buy bitcoin then prices will go up and if any bad news then prices will come down like any think. Basically there is not proper control on btc prices by any big institutions will cause more volatile.

haha a question with an answer

Why that is not bad? I think there are many people that buying bitcoin at higher price so they will hope the price will go high to earn more profit not lose profit just because the price drop significantly. In some way may be good but there are more people will lose profit than people can afford it anyway so it will be good if the price keep on raise so both of them will sure get profit. The matter is more or less only, rather than get nothing

as it was said many times, it is not really comparable, because increasing bitcoin from 5 to 100 isn't like increasing it from 200 to 4000

one thing is sure, the next pump will raise bitcoin to a level that many would not even thought about

There is nothing bad if price drops. Only more people will be able to afford it. More people will have better for Bitcoin. 1+1=3

That is right but it can only get stable once the government of the country starts accepting it as a currency if the government shows their supports towards it, it would definitely attract more and more people and media would also play a very vital role in supporting the bitcoin.

Yes it will get stable if the demand and supply are equal and that is only possible when the adoption level goes high people should start adopting and accepting it as a mode of payment and also the vendors and merchants should start accepting it if the demand and supply is equal the value of bitcoin would be more stable.

I remember back then it was called the "forever 5 USD" era. No one expected a bigger pump. The next pump that doubles the ATH will blow so many minds away.

Bitcoin was once solid as hell at 5 dollars for more than 4 months before the price exploded again. Right now it's not volatile as hell, it has felt pretty solid on the 200 range. For Bitcoin 20 dollars up and 20 dollars down is absolutely nothing. It's a great time to stock up on all that cheap ass BTC.

Wrong, there is and it is called "whale" Basically the volatility is cause by people(or a group of people) manipulating the flow of the price. That is the reason why you are seeing a sudden rise and sudden fall of the price despite that there are currently no news regarding BTC

P.S : news give some hype


Volatility is not good if you are thinking about adoption as people tend to stick with things that are not volatile (some people dislike things that could drop to worthless overnight I suppose ) but if you see this in term of trading than volatility is a bless for trader as it gives some value for it. Basically trader gain more from the volatility though

We all need here is a high value not a low value that you think. If there is a high value in this bitcoin I think its good but the real thing is bitcoin price will drop significantly that it will be bad to us so thats why there are many people out there dont think volatile is a good thing

simple. Volatility give a value to Bitcoin

Nope I dont think there are some people that control the flow of price except the market itself and there are no properties that bitcoin is similar to gold so bitcoin doesnt correspond to gold in other aspect to. It is too much contrast between gold and bitcoin. The is one thing that only bitcoin can win against everything, that is their technology other else is nothing

That's true but it is as same as stock market the value keeps on increasing and decreasing and the value keeps on fluctuating but as per my knowledge and experience it is better to invest in bitcoin rather then going for stocks and i believe that bitcoin have something really special for us to offer.

One reason why bitcoin may fluctuate against the fiat currencies is the perceived store of value versus the fiat currency. Bitcoin has properties that make it similar to gold. It is governed by a design decision by the developers of the core technology to limit its production to a fixed amount.

Well the Bitcoin market price is trying to hold it's ground in the recent past. It hovered a lot around 320 mark and then it's hovering around 230 mark. Hopefully it can become more stable and put an end to your agony.

It follows the rules of the market, the only regulation that we need. Enjoy, forever.

There's a big difference with crypto currency and other markets.  Cryptocoins are the wild west at the moment.  There's all sorts of arbitrage capable markets and it's totally unregulated.  There are absolutely no trade rules enforced or at least no rules that really matter.

Enjoy it while it lasts.

In the free market, the interest rate and the value of the money (1/(all prices measured in that money)) should fluctuate to clear the market. Changes in nature (catastrophies, number of people, inventions) and changes in people (tendency to save / fear of the future, religion, tradition, culture) will necessarily affect both interest rate and value of money. On top of that we have speculation, the successful trading will reduce volatility but unsuccessful trading will increase it. Appearantly people like a stable economic environment with fixed prices, which will lead to step increases or decreases when the prices have to move to clear the market. This includes also money managers' attempts to lock one fiat type onto another.

So just forget stable money, it has always been only a dream.

 

the value increase should bring more stability, so it's not the halving the problem but the time required for it, if it was 2 years, it could have been far better fr a faster grow of bitcoin, now we are stuck with this slow motion because of this also

Let us ait for that time. I guess the price will stay the same until the end of this year and after that hope it will going rise again since the halving is already done. May be it will have some positive impact but I guess that will not that much

I don't think it's a certainty, hence why I said in theory. If less people are involved or there's little demand for bitcoin it wont do anything positive. I'm also not sure if the last halving had a positive impact on the price or not, but hopefully by the time it comes bitcoins demand will have increased so we'll see positive gains.

Yes its true halving will make value of bitcoin increase and that is a great thing when the value is going up and higher and the low of bitcoin producing so the price will going high but I saw near the end of month the price suddenly drop, I didnt know what happened to the value

Yup, that's a much better description of the factors influencing the prices.
A breakthrough in mining is essential though for crypto currency to really 'take over', and well time too.

The halving is a good thing because hopefully and in theory that should make bitcoin's value increase. I think we can all agree that the value increasing couldn't possibly be a bad thing. As long as it keeps creeping up gradually everything is rosey but it's when it falls or a bubble bursts which causes panic.

big players dominate each market. whether it is gold, oil, currency, and so on. it's not only like this in bitcoin. the only difference is that bitcoin has a very low market cap. that makes bitcoin volatile. 2000-3000btc dump can get the price down like $10-$20 which is insane.

It will always be volatile because of reward halving every 4 years. If FED cut new money supply by half every 4 years, it will cause some shock for sure

It's more volatile because there are more big players in ratio with smaller ones so there is a lot of speculation. Bitcoin is not as mainstream as other fiat currencies and no central govt to keep a currency price steady so it is more at the mercy of speculators than an ordinary fiat currency is.

The volatility is the biggest factor that attracts speculators and new investors. Do you think the Winklevii and half of the people who get involved nowadays would even bother with bitcoin if they didn't believe its value would rise considerably in the future? It's all about supply and demand and creating more demand is obviously key to that. Hopefully in the future the value of a bitcoin will become more stable (but lets just hope its worth several thousands when that does work.

Yeah, but the standard of stability is USD and EUR. Unfortunately I doubt BTC will ever be as stable, since it's not regulated. We don't need a super stable BTC price anyway, BTC is like gold.

Volatility is not a bad thing. It gives us the opportunity to make profit on price swings. Which is also one of the reasons why it attracts wealthy investors.

If volatility didn't exist, I probably would check the Bitcoin price once a week or so. Compared to plenty of times per day now.

Well the fact that there is no central bank that intervenes also is one of the reason that led to the volatility. If you observe certain currencies like JPY, the central bank actually intervened if the appreciation of the yen goes up too fast. The central bank will sell their own currency in order to normalize the situation.

Yes but the difference is that with the Dollar you can plan your shopping for the following week to the nearest cent, with Bitcoin by the time you complete your 10 min walk to the corner shop, your $100 worth of Bitcoin could be down to $20. The price of BTC may seem stable now but everyone knows that could change in the blink of an eye. Also, Bitcoin can very easily be manipulated, a lot more easily than fiat and with lot more damaging effects. 1% of Bitcoiners control 99% of all Bitcoin in existence. For instance, Satoshi could very easily move the price of BTC to his whim with his estimated stash of 1,000,000 BTC.

because they are for investment now.

I am a newbie. So I write what I know. Your reply added my knowledge more.

Well it is less volatile than most fiat currencies nowadays, but the volatility remains, though. Also, there are traders who try and play the markets so we can assume that they are adding into the volatility of the price. Supply and demand doesn't affect btc as much as other commodities are affected, that is one thing I observed in bitcoin's economy.

As others say.. Its not that volatile any more.

Its just too much bad press that makes it hard  to get more adopters into the BTC game.

anyone can move millions into or out an exchange and manipulate it at will(and with leverage).

Even if someone just want to buy or sell a good quantity of BTC the price will be highly influenced;

I haven't verified it but a fiat currency trader here said bitcoin's recent prices have been more stable than some of the more popular western currencies. After looking at the Euro's ups and downs since Christmas it comes as no surprise to me.

i would say the thief more than the government, a news about thief, besides the thief's dump(which is already a serious dump) it could lead to a panic sell, that might put a big dent on the market

Currency is supposed to move based on perceived and actual value. Compared to fiat currencies Bitcoin is the LEAST manipulated. People can play around in the market but almost no one can really manipulate the price. In the fact the main people that have been able to affect the price for a temp time have been the government who dumped artificially not worrying about the price. But this is only temp, no one can actually hold the price up or down for any length of time.

The dollar is 100% manipulated cause the government have the ability to alter the supply.

It is volatile because it is very manipulated and not controlled by any instituion
besides, the market is not really big

Actually not much more than fiats these days, ask a Russian or an Iranian or some South American countries how stable their currency is.

http://www.bloomberg.com/quote/DXY:CUR

Bitcoin is NOT VOLATILE.

Actually I was wondering the absolute opposite today. i.e. Why is Bitcoin so stable these days. Sure more users and holders creates stability and also usage holds down any rapid price movements so I guess while Bitcoin is actually flowing that creates a stability?

But my thought is really I think the price stability is purely psychological. Basically to keep it simple people have calmed down. I remember days where 30-50% movements were happening everyday. Actually we could easily bid up like that again even with the many exchanges involved now. I just think people won't allow it due to a belief that Bitcoin is now stable and has a value between 200-300 dollars.


My point is I honestly believe we could decide as a community to bid up to around $500 no sweat. I let the market work out the price but my point is psychology plays probably the biggest part in the price mechanism IMHO at the moment.

Every currency in its infant stages are volatile add in the mix people who get scared easily, also add whales who like to scare these people and manipulate the market and there is your volatility they dump the sheeple get scared and follow with the dump. It gets to a low enough level and the whales buy back at their preferred price. Rinse and repeat ...

Even anwsering your own post, you miss some details that determine its volatility:
- Rate of adoption is hampered by bad press.
- The perceived store of value versus the fiat currency; fixed amount, 21 million.
- Little option value to large holders of the currency.
- News about security breaches make investors react.

+1

so you answered in your post question from your subject. masterpiece, congratulations.

Bitcoin is an emerging digital currency. The demand and supply of bitcoin is changing in every second. So the bitcoin value is volatile more than other currency.