Volatility - major reasons for ?!

[deisik]

Bitcoin is a decentralized currency which has no authority to control its price.Its value is driven by the support from the community.Its price increases or decreases directly in proportion to increase or decrease in demand for bitcoin.There is no variation in supply since it has been already set as 21 million coins for supply.Greater the demand,more increase in price and smaller the demand,lower the price.In this way,we could say that bitcoin expresses its true value.

This is the reason for the volatility. Since bitcoins are not backed up by anything, unlike in fiat currency where it is backed by gold and/or the government that issued the currency, this results to bitcoins being valued by the users themselves. That is why we see a whole lot of volatility here. Maybe in the future when there are more people using it then we could see some stability

There are no fiat currencies today which are backed up any hard asset like gold or silver

It could be said that the US dollar is sort of backed up by oil (see petrodollar) but this itself is just an effect of the US grip over the world, that they can force foreign governments to buy oil for American dollars. In this way, it is rather the power of the state that is actually backing up the dollar, and it is true in respect to any fiat currency out there. But since there are quite a few currencies that had just been volatile at first and then turned to complete trash, this cannot be an explanation for Bitcoin volatility (i.e. the lack of state support)

[JimmieA]

Price fluctuation of btc is largely affected by btc demand in the market. This changes over time, thus creating a rise in price, is also one of the opportunities to make a profit..Market stability is maintained only when btc supply and demand are close together, so btc prices will stabilize.

[krishnapramod]

I just try to find the major reasons for the very high volatility of bitcoins price we all encountered over the last years.

1) Exponential Growth ( in trust and usage)

It's clear this is a very strong reason to cause price volatility, since we have double and double of requesters that all needs to get coins from a scarce bitcoin supply.
So we see price squeezes all over the time (more up than down). Further we have no or lost experience with such exponential growth process esp in money (last adoption was gold some 1000 years before)


2) Evaluation Base CCY ?
I have the strong suspicion that bitcoins volatility is positive correlated to the volatility of the lowest trusted fiat currencies' volatility in the world.
Sadly I cannot proof this by averaging the historical volatilities of a 'poor's currency basket' of (Zimbabwe$, Venezuela$, Egypt pound, Jemen slotty, Syria Dinar,..xyz...) but I estimate, that we have same volatility there as in bitcoin. And all people living in those countries should be way better off with bitcoin and it's vola!
We just see and measure BTC/USD - volatility is high, but we forget where it's based on - on the poor ccys all together - but they are dominant here.

3) Heterogeneous / Fragmented Markets
We now have some 100 different exchanges and local places where you can exchange you bitcoin against any other fiat or crypto. There is no condensed order book / matching for a trade and limited arbitrage due to capital protection of some states.
I'd guess we'd see a fraction of the actual volatility, if we would have a (ideal) single world exchange, where all must trade BTC/USD (USD is just a default example for a world fiat and rest crypto ccy) .


Any other reasons you could see?

1. Supply and demand. Simple equation, bitcoin is limited in supply + more demand = price fluctuations. The same situation happens when someone invested heavily in bitcoin either keeps his bitcoin for a long period of time or dumps it. Compared to all other major currencies, the market cap of bitcoin is still small, 44 billion so even a small percentage of pumping or dumping can cause a marginal fluctuation in price. This would decrease as more users adopt and market cap increases.

2.  Store of value vs a medium of exchange. This is similar to supply and demand. Holding on to bitcoin vs using bitcoin as a medium of exchange thus circulating it.

3. Media. Yeah to some extent media does influence the price of bitcoin. A positive news brings with it an increase in price and even random criticism of bitcoin by billionaires/business magnates tend to affect the price a bit. Bitcoin is a global currency and any significant financial, economical, or political global event would affect its price.

[Lieldoryn]

Bitcoin is a decentralized currency which has no authority to control its price.Its value is driven by the support from the community.Its price increases or decreases directly in proportion to increase or decrease in demand for bitcoin.There is no variation in supply since it has been already set as 21 million coins for supply.Greater the demand,more increase in price and smaller the demand,lower the price.In this way,we could say that bitcoin expresses its true value.

This is the reason for the volatility. Since bitcoins are not backed up by anything, unlike in fiat currency where it is backed by gold and/or the government that issued the currency, this results to bitcoins being valued by the users themselves. That is why we see a whole lot of volatility here. Maybe in the future when there are more people using it then we could see some stability

There are no fiat currencies today which are backed up any hard asset like gold or silver

It could be said that the US dollar is sort of backed up by oil (see petrodollar) but this itself is just an effect of the US grip over the world, that they can force foreign governments to buy oil for American dollars. In this way, it is rather the power of the state that is actually backing up the dollar, and it is true in respect to any fiat currency out there. But since there are quite a few currencies that had just been volatile at first and then turned to complete trash, this cannot be an explanation for Bitcoin volatility (i.e. the lack of state support)

My opinion is that the dollar is so popular not because oil is traded in dollars, because before the Americans invested a lot of money to spread the dollar around the world. They were handing out loans even free of charge. Now almost every person on earth is in the hands of dollars and not beneficial to anyone his fall. Bitcoin has no centralized management and therefore the change in demand for it so affects its stability.

[machinek20]

For me the volatility happened because bitcoin is slipping, the last time when bitcoin transaction fee increase and the slow confirmation, a lot of people chose another alt coin to used, and alt coin is in a good stage this year so a lot of investor is investing in alt coin, but they only used it for trading, so its pumping and dumping activity and it cause volatility

[Tamilson]

For me the volatility happened because bitcoin is slipping, the last time when bitcoin transaction fee increase and the slow confirmation, a lot of people chose another alt coin to used, and alt coin is in a good stage this year so a lot of investor is investing in alt coin, but they only used it for trading, so its pumping and dumping activity and it cause volatility

As volatility is just around the corner. These are the factors just to sum it up.

1. Supply and demand
2. Speculations
3. Changes in the mmarket
4. Investors

[FasTroy]

For me the volatility happened because bitcoin is slipping, the last time when bitcoin transaction fee increase and the slow confirmation, a lot of people chose another alt coin to used, and alt coin is in a good stage this year so a lot of investor is investing in alt coin, but they only used it for trading, so its pumping and dumping activity and it cause volatility

Yes, i agree with you, altcoins play a big part for bitcoin volatility, mostly this year, because most altcoins price are increased. So people begin to invest in these altcoins, in result bitcoin have a big volatiltiy of price. I think this is the major reason.

[Yakamoto]

Bitcoin is a decentralized currency which has no authority to control its price.Its value is driven by the support from the community.Its price increases or decreases directly in proportion to increase or decrease in demand for bitcoin.There is no variation in supply since it has been already set as 21 million coins for supply.Greater the demand,more increase in price and smaller the demand,lower the price.In this way,we could say that bitcoin expresses its true value.

This is the reason for the volatility. Since bitcoins are not backed up by anything, unlike in fiat currency where it is backed by gold and/or the government that issued the currency, this results to bitcoins being valued by the users themselves. That is why we see a whole lot of volatility here. Maybe in the future when there are more people using it then we could see some stability

There are no fiat currencies today which are backed up any hard asset like gold or silver

It could be said that the US dollar is sort of backed up by oil (see petrodollar) but this itself is just an effect of the US grip over the world, that they can force foreign governments to buy oil for American dollars. In this way, it is rather the power of the state that is actually backing up the dollar, and it is true in respect to any fiat currency out there. But since there are quite a few currencies that had just been volatile at first and then turned to complete trash, this cannot be an explanation for Bitcoin volatility (i.e. the lack of state support)

It pisses me off that we're in this kind of place now too, since everything is skyrocketing in value since we lost any sort of peg to a hard asset and now we have to rely entirely on the whims of the government to not be printing money constantly. Back in the '50s a half would be half the yearly income, now it's over 4 times a yearly income. And jobs and wages keep getting depressed. Not a good economic situation and it makes sense as to why people are dropping out of society because of it.

I wish we could go back to having banknotes that were actually worth something, instead of the worthless paper or plastic which is now giving way to degeneracy.

[Minerolero]

I wonder how would be the volatility if we could exclude the speculation factor from the scene.

[Daniel91]

Bitcoin market is not different than any other market in the world.
It means that people decide about money based on emotions, not rational reasons.
So, if bitcoin start to rise, everybody are happy and buying.
When something happen and bitcoin start to go down, everybody sell in panic, and the value of bitcoins is even more collapsing.
There are no rational explanation for it, believe me.
You have to study human emotions in order to understand it

[hv_]

I wonder how would be the volatility if we could exclude the speculation factor from the scene.

The speculation factor is one major reason for adoption. Think about all the small forex traders trading with nearly no capital but with leverage. All the gamblers and gamers. They have no big new playground for pennies.

[Victorycoin]

This is the reason for the volatility. Since bitcoins are not backed up by anything, unlike in fiat currency where it is backed by gold and/or the government that issued the currency, this results to bitcoins being valued by the users themselves. That is why we see a whole lot of volatility here. Maybe in the future when there are more people using it then we could see some stability.

Wake up now, no fiat currency out there is still backed by gold, it used to be back in the days, but not anymore. As a matter of fact, government issued currencies are backed by nothingness, that is the reason, they print enormous quantities at will and a chief reason inflation is already double digits in most countries.
 
Bitcoin supply for now is capped at 21 million coins and that cannot be faked, transactions are transparent and a holder has the final say what becomes of their money unlike the manipulations common with fiat currencies. These and more exquisite attributes keeps driving the demand for Bitcoin high and the resultant market dynamics creates the volatility we're seeing. However by the time Bitcoin is embraced by a lot more people, it is likely to become relatively stable.

[deisik]

Bitcoin is a decentralized currency which has no authority to control its price.Its value is driven by the support from the community.Its price increases or decreases directly in proportion to increase or decrease in demand for bitcoin.There is no variation in supply since it has been already set as 21 million coins for supply.Greater the demand,more increase in price and smaller the demand,lower the price.In this way,we could say that bitcoin expresses its true value.

This is the reason for the volatility. Since bitcoins are not backed up by anything, unlike in fiat currency where it is backed by gold and/or the government that issued the currency, this results to bitcoins being valued by the users themselves. That is why we see a whole lot of volatility here. Maybe in the future when there are more people using it then we could see some stability

There are no fiat currencies today which are backed up any hard asset like gold or silver

It could be said that the US dollar is sort of backed up by oil (see petrodollar) but this itself is just an effect of the US grip over the world, that they can force foreign governments to buy oil for American dollars. In this way, it is rather the power of the state that is actually backing up the dollar, and it is true in respect to any fiat currency out there. But since there are quite a few currencies that had just been volatile at first and then turned to complete trash, this cannot be an explanation for Bitcoin volatility (i.e. the lack of state support)

My opinion is that the dollar is so popular not because oil is traded in dollars, because before the Americans invested a lot of money to spread the dollar around the world. They were handing out loans even free of charge. Now almost every person on earth is in the hands of dollars and not beneficial to anyone his fall. Bitcoin has no centralized management and therefore the change in demand for it so affects its stability.

"You can get much further with a kind word and a gun than with a kind word alone"

Apart from that, I can't really fathom what do you mean by Americans investing "a lot of money to spread the dollar around the world". What money do you refer to here? Isn't dollars that money exactly? In a certain sense, they really poured a lot of money into the advancement of their economy, but that's what many countries do anyway. As to me, most of dollar popularity was due to the fact the US was not particularly affected by the two devastating wars that had left half of the world (and the best half of it) in ruins

[squatz1]

I'd say one of the biggest reasons at the moment is going to have to be all of the tons of people joining in on Bitcoin thinking it's going to be 'easy money' for whoever gets in on it fast, so what it's doing right now is making a HUGE DEMAND for a currency that is really IMO being used for mostly trade at the moment. This is one of the core reasons, but some of the other reasons are going to be the amount of money that's being put into cryptos in general (not just Bitcoin) and these people need a currency to exchange, which is always bound to be bitcoin.

Whales are the ones that are making this volatility a thing, or an issue, these and the day traders are the people that are bound to make a SHIT TON of money from the volatity being higher as they have a higher margin to be able to catch Bitcoin on and make a buck.

[TeamSnapshot]

At its heart its solely supply and demand that is the cause of volatility. Aside from large cause and effect cases trying to be logical and pin point clear event can be challenging as markets aren't a rational beast.

[hv_]

I'd say one of the biggest reasons at the moment is going to have to be all of the tons of people joining in on Bitcoin thinking it's going to be 'easy money' for whoever gets in on it fast, so what it's doing right now is making a HUGE DEMAND for a currency that is really IMO being used for mostly trade at the moment. This is one of the core reasons, but some of the other reasons are going to be the amount of money that's being put into cryptos in general (not just Bitcoin) and these people need a currency to exchange, which is always bound to be bitcoin.

Whales are the ones that are making this volatility a thing, or an issue, these and the day traders are the people that are bound to make a SHIT TON of money from the volatity being higher as they have a higher margin to be able to catch Bitcoin on and make a buck.

These whales are only whales yet since the real whales like Black Rock and co are not or very tame in the game and the daily trading volume is that of a poor country's currency.

[szpalata]

Price fluctuation of btc is largely affected by btc demand in the market. This changes over time, thus creating a rise in price, is also one of the opportunities to make a profit..Market stability is maintained only when btc supply and demand are close together, so btc prices will stabilize.

Yes, so I want to correct this that price fluctuations are not only determined by the demand but also the amount of available bitcoins (supply). These are basically the factors of Bitcoin's volatility.

[classicsucks]

This is the reason for the volatility. Since bitcoins are not backed up by anything, unlike in fiat currency where it is backed by gold and/or the government that issued the currency, this results to bitcoins being valued by the users themselves. That is why we see a whole lot of volatility here. Maybe in the future when there are more people using it then we could see some stability.

Wake up now, no fiat currency out there is still backed by gold, it used to be back in the days, but not anymore. As a matter of fact, government issued currencies are backed by nothingness, that is the reason, they print enormous quantities at will and a chief reason inflation is already double digits in most countries.
 
Bitcoin supply for now is capped at 21 million coins and that cannot be faked, transactions are transparent and a holder has the final say what becomes of their money unlike the manipulations common with fiat currencies.

LOL, the term "fiat currency" specifically means money created by government decree, with no explicit backing other than the rule of law and violence by that government. For example, gold and silver backing of USD ended 100 years ago.

I'm surprised that nobody has pointed out that Bitcoin price can easily be manipulated by EXCHANGES. In fact, it has been proven that Mt. Gox increased the BTC/fiat exchange rate by about 10x, before the whole thing came crashing down. Many may not realize that exchange transactions are not recorded on the blockchain, only with withdrawals and deposits go to the bank and blockchain records. An exchange can sell you "bitcoin" or "dollars" all day even if there is nothing to back it. An exchange can "buy bitcoin" from itself all day long as well. Naturally this causes increases in the bitcoin price. Of course exchanges and traders can arbitrage each other, but they can also work together and collude to drive the price upward (or downward). Finally, exchanges can "front-run" any trade - here they simply buy or sell milliseconds before you do, taking a small fraction from each transaction (on top of any fees they charge). It is known in the fiat financial world that Goldman Sachs and other market-makers front-run every day 24x7, using high frequency trading datacenters.

None of this price-changing activity by exchanges would be illegal - the Bitcoin space is still largely unregulated. Mark Karpeles went to jail for one year for "fraud", but that was simply for misrepresentation and lying. Given this environment, I don't see why and exchange wouldn't engage in at least some price manipulation... likely they would be a bit smarter than Karpeles was...

[DoublerHunter]

Price fluctuation of btc is largely affected by btc demand in the market. This changes over time, thus creating a rise in price, is also one of the opportunities to make a profit..Market stability is maintained only when btc supply and demand are close together, so btc prices will stabilize.

Yes, so I want to correct this that price fluctuations are not only determined by the demand but also the amount of available bitcoins (supply). These are basically the factors of Bitcoin's volatility.

I agree with you, the volatility of the bitcoin price is always depending in the demand and supply and you can't split those things because they are very related to each other, if the demand goes up then the supply goes down and if the supply goes up then it means that the demand is going down so it is very related to each other and as long as we are maintaining the demand that we are getting right now then the price will keep going up.

[Oilacris]

Price fluctuation of btc is largely affected by btc demand in the market. This changes over time, thus creating a rise in price, is also one of the opportunities to make a profit..Market stability is maintained only when btc supply and demand are close together, so btc prices will stabilize.

Yes, so I want to correct this that price fluctuations are not only determined by the demand but also the amount of available bitcoins (supply). These are basically the factors of Bitcoin's volatility.

I agree with you, the volatility of the bitcoin price is always depending in the demand and supply and you can't split those things because they are very related to each other, if the demand goes up then the supply goes down and if the supply goes up then it means that the demand is going down so it is very related to each other and as long as we are maintaining the demand that we are getting right now then the price will keep going up.

They cant really be separated because things normally goes on this way and its part of economic thing not only existing on bitcoin but all things that surrounds us we can eventually saw it on everyday living and yes supply and demand does really matter. It just a normal thing for the price to rise up when theres demand and the supply is limited then expect value would really change up.