Volatility - major reasons for ?!

[GreenBits]

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.

Methinks the volatility is honestly just a bunch of bullshit this is like the most heavily manipulated market you can participate in; no regulations and it doesn't take a lot of fiat to manipulate some of the exchange. Just deep pockets or coordinated selling/buying. The price moves so much because the investors are so inexperienced, and professional traders are making a killing off of inexperienced traders that are reactionary and undisciplined. It alsooves because whales want it to move. Mark my words, the price of bitcoin is being depressed until corporate American can buy in. It will quickly become fully regulated, and the price will soar. Lobbies will see to that. Otherwise, it will be an alt, mostly ETH.

There is no agreed upon way to value a bitcoin. Hence, a price borne completely on speculation won't be very stable.

[deisik]

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

Oh, it is you again with your amateurish crap

I'm curious if you really understand what front-running actually means (there can be a few different ways to do it). There is no sense to front-run any trade (as you claim), and I don't see what you mean by "taking a small fraction from each transaction" (beyond the regular trade fee). To tell the truth, I don't see anyone taking anything extra from my trades. Cryptsy had been caught by directly and openly changing the order queue (if that is your point), but this is not what front-running client orders typically means (and that might in fact have been a bug in their trading engine). And just in case, dollar backing by gold ended less than 50 years ago (see the Bretton Woods monetary system)

[qiman]

At the moment the infrastructure and landscape that is shaping Bitcoin is in flux and ever changing. Once more and more mainstream buyers and holders of Bitcoin enter the market as opposed to hit and run speculators, we should see a more stable price evolve. There is also the fact that Bitcoin is limited in supply so if demand skyrockets, so will the price.

[classicsucks]

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

Oh, it is you again with your amateurish crap

I'm curious if you really understand what front-running actually means (there can be a few different ways to do it). There is no sense to front-run any trade (as you claim), and I don't see what you mean by "taking a small fraction from each transaction" (beyond the regular trade fee). To tell the truth, I don't see anyone taking anything extra from my trades. Cryptsy had been caught by directly and openly changing the order queue (if that is your point), but this is not what front-running client orders typically means (and that might in fact have been a bug in their trading engine). And just in case, dollar backing by gold ended less than 50 years ago (see the Bretton Woods monetary system)

Ohh, you again, dumbazz... should've kept you on ignore, but I took the bait...

Front-running is a very simple concept. Google it if you can't grasp it. If front-running is done by a bitcoin exchange, it's easier than what Goldman and other market-makers currently do, and near impossible to detect. Cryptsy got caught, there is an academic paper about the Gox-rigging (post mortem of leaked trade logs), and Bitfinex is currently getting arbitraged for doing it. Poloniex is more sneaky and cuts thin slices of cheese off the margin traders, and occasionally flips a "circuit breaker". But nobody is "taking anything extra from your trades", LOL, how would you know?

Federal Reserve bank was created in 1913 - effectively the end of USA gold standard. Private ownership of gold was made illegal in the 1930s and some gold was even confiscated shortly thereafter. Gold certificates were unredeemable from this point onward. Only foreign governments were allowed to redeem USD for gold. Nixon "closed the gold window" in 1971, but reserves were very fractional by that point anyway.

Any other questions?

[deisik]

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

Oh, it is you again with your amateurish crap

I'm curious if you really understand what front-running actually means (there can be a few different ways to do it). There is no sense to front-run any trade (as you claim), and I don't see what you mean by "taking a small fraction from each transaction" (beyond the regular trade fee). To tell the truth, I don't see anyone taking anything extra from my trades. Cryptsy had been caught by directly and openly changing the order queue (if that is your point), but this is not what front-running client orders typically means (and that might in fact have been a bug in their trading engine). And just in case, dollar backing by gold ended less than 50 years ago (see the Bretton Woods monetary system)

Ohh, you again, dumbazz... should've kept you on ignore, but I took the bait...

Front-running is a very simple concept. Google it if you can't grasp it. If front-running is done by a bitcoin exchange, it's easier than what Goldman and other market-makers currently do, and near impossible to detect. Cryptsy got caught, there is an academic paper about the Gox-rigging (post mortem of leaked trade logs), and Bitfinex is currently getting arbitraged for doing it. Poloniex is more sneaky and cuts thin slices of cheese off the margin traders, and occasionally flips a "circuit breaker". But nobody is "taking anything extra from your trades", LOL, how would you know?

I'm still waiting for your explanation how front-running actually works. I'm not interested in hearing empty verbiage that you pour on me. I want to hear details explaining where and how front-running allows exchanges to earn profits. After all, it was your claim, not mine, so the burden of explaining is obviously on you, not on me. Regarding my trades, if I place an order and it gets executed, I receive exactly the amount I'm buying minus trade fees. No one is taking any fraction from my trades apart from what I know beforehand (i.e. fees). For your information, the gold standard in the US ended in 1933 when the Fed had withdrawn US notes ("real dollars", which had nothing to do with the Fed) from circulation. The latter had been fully redeemable for gold until they were declared obsolete

You may want to go and learn the history of the American dollar

[babsalt1975]

The price of bitcoin has been on the rise in the past few months. Sometimes we experience drops and sometimes we have highs in the price. Personally, I feel there are a few reasons that can be attributed to the volatility of the bitcoin price:
1. Over 700 crypto-currencies exist. Bitcoin is used to buy other crypto-currencies, which increases demand for Bitcoin.

2. Bitcoin is up 166% to $2480 on June 25 from $935 on March 24.

3. Japan approves Bitcoin as a legal form of payment April

4. Blockchain technology gives credibility to digital currencies.

[bitcoinbox]

I try an explanation:
The major reason of the volatility is because lots of people/investors own lots of bitcoins. Everytime these guys (whales) buy or sell, it has an impact on the market. This impact is amplified/followed almost systematically by a "shockwave" (the small investors/traders are following the trend).
This is just my idea..

[ladydark]

Bitcoin is a decentralized currency and its price either increases or decreases in proportion to increase or decrease in demand for bitcoins.There is no authority or governing body to control bitcoin price.Bitcoin price is driven by the support of bitcoin community.So its quite natural taht bitcoin price is highly volatile and it would remain volatile till last.Even volatility is the main feature of bitcoin due to which traders gain profits from the difference in price.

[hv_]

The gold price dropped heavily this morning. Reason was a fat finger issue / human stupidity issue: A guy just mixed ounces and lots and even gold markets are very thin / low liquid.

Same could happen in bitcoin's thin markets as well.

More reasons to be unveiled....  

[Novun]

All markets, including cryptocurrencies, have volatility. All markets depend on faith. There isn't a company or resource behind bitcoin so there is no wonder there is volatility.
There are ways to reduce volatility: for example, invest in more cryptos or even invest 60% in stocks and 40% in cryptos.
It's extremely weird for any rational person to be surprised about volatility.

[iamTom123]

I can feel that we are now entering a stage where people are gradually questioning anything related to Bitcoin and this can be one of the ultimate reasons behind the continuing drop of Bitcoin and the whole cryptocurrency market in general. People are getting back to reality...slowly moving away from the speculative and very positive views expressed since the beginning of this year.

As to volatility, it can be spurred by the fact that Bitcoin is still that really so big and can still be manipulated by groups who have the financial clouts to do so. Plus recently there were entrance of new Bitcoin holders and they can easily be swayed to sell for just very simple reasons.

Volatility have been serving many traders well, that is a fact that should also be taken into consideration. Although it can help Bitcoin if volatility rate can be lessen to a certain degree which can make it more popular.

[hv_]

The combination of whales (long ETH for 30Mio) , thumb traders (sell all at once), pre-mature exchange (GDAX) and very thin order books

-> leads to monster volatility!


http://video.cnbc.com/gallery/?video=3000631102

[deisik]

As to volatility, it can be spurred by the fact that Bitcoin is still that really so big and can still be manipulated by groups who have the financial clouts to do so. Plus recently there were entrance of new Bitcoin holders and they can easily be swayed to sell for just very simple reasons

You meant to say not so big, right?

This is certainly so, but this is surely not all. Before Bitcoin got to well over 4 digits, volatility wasn't that insane, though Bitcoin obviously couldn't be bigger at that time than it is now. The real systemic cause of high volatility is the price itself as well as Bitcoin fixed supply. If we assume that monetary supply remains more or less the same, at least, short to medium term (which is a good assumption), the higher price necessarily means that the market supply is diminishing, but that leads to less liquidity (supply side, before all) at higher prices which makes markets a lot more prone to greater volatility

[joebrook]

Bitcoin is a decentralized currency and its price either increases or decreases in proportion to increase or decrease in demand for bitcoins.There is no authority or governing body to control bitcoin price.Bitcoin price is driven by the support of bitcoin community.So its quite natural taht bitcoin price is highly volatile and it would remain volatile till last.Even volatility is the main feature of bitcoin due to which traders gain profits from the difference in price.

So the people are not patronising the currency as they used to do,or are they questioning its valuability now, from what's happening it's going to be hard for it to pass the $3000 threshold.

[jc89]

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 but not only the demand, the supply also plays an important role in the fluctuation of Bitcoin's price. Bitcoin's price is dictated by the number of demand with respect to the available supply in the market so both demand and supply have their roles. And as to what you've mentioned (I will add the supply), bothe demand and supply changes over time, thus making the price vary depending on the demand-supply relations.

The stabilization of Bitcoin's price is not dependent on the closeness of BTC's demand and supply. Even they are far apart, stabilization may also occur considering that their proportions grows simultaneously.

[Pente]

Volatility is a result of to much energy passing through a system. Read Chaos by James Gleick to see how deterministic behavior switches to non-deterministic behavior (chaotic). For Bitcoin, money is the energy entering the system. This results in runaway valuation which then collapses to a new high.

This will continue till cryptocurrency reaches it's final valuation of the economy. At this point, we will switched to a more steady and predictable growth. I am guessing this final growth will be around 12% per year in value. There may be no fiat currency left to measure it though, you will just see the price of goods slowly dropping in terms of BTC instead.

[classicsucks]

I'm still waiting for your explanation how front-running actually works. Regarding my trades, if I place an order and it gets executed, I receive exactly the amount I'm buying minus trade fees. No one is taking any fraction from my trades apart from what I know beforehand (i.e. fees).

Although I don't owe you any explanations, I can't help but laugh a bit. If you place an order and it gets executed at the price you chose, what else would happen, duh? It's not like the exchange will tell you "We bumped the price a little" and it's on your statement, LOL. The point is that you bought a fraction higher than spot and sold a fraction lower than spot.  Frontrunning is when the exchange places a sell/buy orders in front of buy/sell orders to lift/drop the price a bit and profit off both sides of a trade.  I don't know how to explain it to you any better... or are you playing dumb?

Finally, when you close an order on an exchange, did you really think you're buying/selling coin? It's just a float until you withdraw fiat or coin. And therein lies the problem...

[GreenBits]

The chief reason for bitcoin's volatility, in my opinion, is the lack of investor experience, and lack of capitalization (weak/thin books). Half of the users that trade bitcoin are children, or at least don't speak English so good, as evidenced by the trollboxes of the various exchanges. The lack of an actual trading education, coupled with the low total capitalization on some exchanges (HitBTC is a good example), magnifies every pump, and worsens every dump. The term is called weak hands, but it's more than that; people in this space react too much off of news, and way too late after the news has dropped. In other words, lack of trading experience

The price is also manipulated to shit, because of the low total capitalization compared to forex, these positions are drops in a bucket.

[Rahar02]

I think the only reason for that is because Bitcoin does not have a real economy yet. It is just used for trading purpose, unline other traditional currencies which are used to buy and sell stuff

Indeed, mostly people use it for trading but there are a lot of people who store their wealth in bitcoin as well.
Another reason why bitcoin price so volatile because it's decentralized digital currency, different with fiat currency such as USD or Euro which backed by government.
Without any backup, bitcoin stand alone with people who support and trust it'. Bigger market cap or higher price make it more volatile, because if people sell their bitcoin could make its price drop even more.

[DOGE12321]

Yes. I can see another point. Add 'lesser mainstream attention'. Bitcoin is highly underrated at the moment. Not many people use it, compared to fiat. When suddenly a large company like Amazon or eBay accepts Bitcoin, media companies would jump on it. Thus new members in the network increase demand...for a short time. Afterwards, people begin realising how useless Bitcoin is in their real life and leave the community. When masses of people leave the network like this, the price drops.