Cryptocurrency Check: Why Are Bitcoin Prices So Volatile? MintGenie explained

About six years ago, the price of a bitcoin was around $580 (equivalent to almost 40,000) in August 2016. Not only that, it was sold for around $11,200 (almost 8.17.000) in August 2020 before rising to over $37.600 (almost 28 lakh) in August 2021 and recorded a whopping growth of around 236 percent in just 12 months.

Now, in September 2022, it has fallen to $20,210, recording a sizeable 46 percent drop in just over a year.

Investors often wonder why the price of bitcoin fluctuates so much. The unpredictability of the price makes it seem “unreliable” as an investment to some investors. But to understand why the price is changing so quickly, we need to understand the reasons driving this cryptocurrency, and most importantly – its demand.

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reasons for the top

A major reason for the massive price jump is that the established institutions like pension funds and mutual funds have now started investing in them. Until 2017, bitcoins were invested by individual investors. But with greater acceptance, many billionaire investors and financial institutions have now spoken openly about Bitcoin and its future. For example, JP Morgan started offering Bitcoin funds to its wealthy clients and also created a digital coin JPM Coin to make payments using blockchain technology.

musky effect

When Elon Musk-led electric car maker Tesla bought $1.5 billion worth of bitcoins in February 2021, the price of one bitcoin hit an all-time high of $44,000 (around $200,000). 33 lakhs). Musk later hesitated to allow Tesla payments in bitcoins, citing environmental concerns that bitcoin mining uses large amounts of electricity. However, in July 2021, he again announced that Tesla will likely accept payments for Tesla in bitcoins, pushing bitcoin prices higher again.

READ MORE: How to trade the bearish flag pattern in crypto

Higher acceptance

Sellers and merchants have also started accepting bitcoins. Paypal, Starbucks, BMW, Expedia and Zinga, among many others, now allow transactions in bitcoins. Any positive statement by central banks in favor of blockchain technology will likely tip the balance in favor of bitcoins.

El Salvador in June became the first country to accept bitcoin as legal tender from September 2021. In fact, hardly any institution or country is averse to blockchain – the technology behind the development of Bitcoin.

Bitcoin prices have soared to new all-time highs recently. Some have invested in them for fear of missing out, while some others are still uncertain about their future. Whichever side you are on, it is advisable to exercise due caution before wagering large sums of money.

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