Bitcoin price fluctuations come as no surprise, especially to those who are already involved in online trading. Its price fluctuations have become more of a daily routine that almost every online retailer has become accustomed to. By February 2021, the trading value of Bitcoins has reached over USD 44,000. However, it can easily fall very dramatically.
Bitcoin is a digital currency primarily used to buy goods and pay for services provided online. As we all know, a currency must be stable so that both investors and consumers can determine fair prices forever. However, this is not the case with Bitcoin.
Because of this price volatility, many are still reluctant to invest in them. In fact, some investors are of the opinion that the stability of this digital currency could be pure speculation rather than a serious real investment.
But what are the reasons why the bitcoin price is still fluctuating even though it has been created since 2009?
Bitcoin is not yet a stable form of currency
Since its inception in 2009, Bitcoin as a means of payment has not yet reached the status of stability. In other words, it’s not viable yet. The main reason for this is that it is not yet recognized or even known worldwide.
To date, bitcoins are generally circulated online, but only within the United States. In fact, one country has banned its use. This does not bode well for Bitcoin, as in order for it to remain stable and viable, it needs to be viewed as an alternative currency. However, for a currency to be considered an alternative currency, it must be used worldwide.
Bitcoin is not yet regulated
Another reason why bitcoin price is always fluctuating is that it is not regulated by central banks or the government. The currency needs proper regulation to be stable. Additionally, the price of bitcoins is typically influenced by the supply and demand of cryptocurrencies powered by trading exchanges. However, this sometimes leads to unethical practices due to the lack of proper regulation. Without regulation, these practices currently taking place in online commerce cannot be stopped or prevented.
A prime example of unethical practices is the laundry trade. Wash trading is one of the methods of manipulating the market by having one party buy and sell the same assets to inflate their trading volume. This is usually done to make investors appear more knowledgeable and legitimate. As a result, investors can uncontrollably increase their trading volume as a result of this practice, creating a questionable exchange rate.
Luckily, car wash trading activity has decreased over the course of 2019. This gives hope for lower bitcoin price fluctuations.
Recent Improvements in Bitcoin
However, due to network effects, bitcoin usage has increased over time. The network effect occurs when a service or good has increased in value due to the growing number of people using it. Compared to the year it was created, Bitcoin is more popular today. If this continues, the time could come when Bitcoin is accepted as an alternative currency around the world.
Additionally, the reduction in wash trading activity could bode well that Bitcoin can be regulated in the near future. These recent improvements have been recognized by many people who were very doubtful at first but are now convinced that Bitcoin could have a brighter future than the one it has today.