Why Is Bitcoin's Value So Volatile?

[bob3772]

Since Bitcoin isn't yet adopted in most places, a large part of its supply and demand is based on price speculation.  So as the confidence changes, the price fluctuates a lot.  As its adoption increases and people send or receive payments for commerce instead of speculating on its price, it should be less volatile.

Pretty much this exactly, there is such a large proportion of the investment in bitcoin that comes from people speculating on the price that it will always be susceptible to big swings as demand and supply surge due to the overall feel of the market. Any market that sees big gains always sees high volatility.

[hisuka]

Why Is Bitcoin's Value So Volatile? I am confused to buy bitcoin now when it's value is too high.

I think it´s a very young investment with small real life use cases. So being a speculative asset it´s normal to have very big variations in price. That what makes it fun and is atracting so many people:)

Yes an speculative asset that makes people attracts bitcoin. Bitcoin value is volatile because there are many who  suppprts bitcoin. Which invested in, continues to buy and sell on bitcoin that makes it volatile. So the demand is increasing in bitcoin.

[1Referee]

You blame the shallow orderbooks, but how many orderbooks of significance has come up recently? I can tell you, basically none. The total majority of bitcoins (if we talk about Bitcoin) are still traded at the top 3-4 exchanges (like Bitfinex, Bithumb, Bittrex and maybe a few others). So it is not about orderbooks as such, it is more about price itself. I've been telling that for years already, i.e. when the price rises high enough (and we seem to be there already), the supply will necessarily run dry. This is sort of a given. But when the supply runs dry, anyone can change it and thus dramatically affect the prices. This is the real cause of runaway volatility

This market lacks liquidity, and that by a huge margin. If the orderbooks were properly filled with legit fiat buy orders, and not orders from pussy bots pulling back everything with the slightest downwards movement, we wouldn't experience current level of volatility. Throughout the years nothing has changed in terms of orderbook liquidity, and that's something that definitely needs to change. At least, back in the days you could dump 100BTC into a $40,000 buy order, where nowadays this same buy order only manages to catch up 10BTC. The higher the price is moving up, the worse this situation will get. That's why a global orderbook is pretty much the best possible solution to tackle this 'problem'. I find it weird that you don't see the importance of how much of an important role orderbooks fill in terms of volatility...

[deisik]

You blame the shallow orderbooks, but how many orderbooks of significance has come up recently? I can tell you, basically none. The total majority of bitcoins (if we talk about Bitcoin) are still traded at the top 3-4 exchanges (like Bitfinex, Bithumb, Bittrex and maybe a few others). So it is not about orderbooks as such, it is more about price itself. I've been telling that for years already, i.e. when the price rises high enough (and we seem to be there already), the supply will necessarily run dry. This is sort of a given. But when the supply runs dry, anyone can change it and thus dramatically affect the prices. This is the real cause of runaway volatility

This market lacks liquidity, and that by a huge margin. If the orderbooks were properly filled with legit fiat buy orders, and not orders from pussy bots pulling back everything with the slightest downwards movement, we wouldn't experience current level of volatility. Throughout the years nothing has changed in terms of orderbook liquidity, and that's something that definitely needs to change. At least, back in the days you could dump 100BTC into a $40,000 buy order, where nowadays this same buy order only manages to catch up 10BTC. The higher the price is moving up, the worse this situation will get. That's why a global orderbook is pretty much the best possible solution to tackle this 'problem'. I find it weird that you don't see the importance of how much of an important role orderbooks fill in terms of volatility...

But you don't want to see the real causes of that

You blame the empty orderbooks, but it is like shooting the messenger. Even if you combine all orderbooks into a single huge orderbook, this won't help much in the long run (provided the price continues to rise, of course). With the price rising higher, this global orderbook will necessarily run dry as well in the end. There is simply no other outcome given that the number of coins is more or less fixed (i.e. monetary supply doesn't grow much). Indeed, new coins are still being mined, but they no longer make particular difference and now directly contribute to greater volatility (instead of preventing it). This is what I call a Big Rip theory of Bitcoin and now you seem to implicitly accept it

[doomloop]

Why Is Bitcoin's Value So Volatile? I am confused to buy bitcoin now when it's value is too high.

It is volatile because it is dependent with its market demand such that if the demand is high, its value be expensive. And since the demand changes from time to time, its market value will also too. But you don't need to hesitate wheether to biy or not because if you have patience you will earn huge profit in the future since Bitcoin is continuously growing in all aspects from its market demand upto its market price.

The price and the value of the bitcoin are so high and volatile. The price of the bitcoin is still not fixing and it is growing so we are expecting a lot of pump and the dumps from the bitcoin. The value of the bitcoin rose to the demand of the market. As it go high and low so the market value decreases and increase at the same time. So buy more bitcoin and don’t be afraid of the loss because you can earn more than invested money and it will provide you a bright future.

[CoinsCoinsEverywhere]

Since Bitcoin isn't yet adopted in most places, a large part of its supply and demand is based on price speculation.  So as the confidence changes, the price fluctuates a lot.  As its adoption increases and people send or receive payments for commerce instead of speculating on its price, it should be less volatile.

Even if adoption would help price stability, bitcoin is caught in a paradox.  More stability may require more adoption, but more adoption (especially with respect to using it for commerce) will require more stability.  It's very hard to use a currency for retail purchases that can change value with respect to fiat by 1% in a minute.  Why would I use btc to buy something when there's a significant chance that it could cost a couple percent more by the time I actually complete the purchase?

[kidsuzudn]

Bitcoin's Value is volatile because there is a marketcap will decided how valuable bitcoin is, and that marketcap is effected by the investors all over the world, who owns bitcoin, if there is a new that disadvantage for Bitcoin, many investors will sell Bitcoin for real fiat so the price of bitcoin is down. If there is a new that advantage for bitcoin, more people know about bitcoin and they will buy Bitcoin, so the price of Bitcoin is up.

[christian07]

Why Is Bitcoin's Value So Volatile? I am confused to buy bitcoin now when it's value is too high.

if theres so many people investing here in bitcoin or also promote some campaign here they will going to buy bitcoin that is why bitcoin going high or down(volatile) this is not only the answer because in transaction also here they will going to create a movement to sell and buy thats why its volatile

[justarmc]

Bitcoin has a high volatility, which is advantageous for traders, there are many reasons for this, for example, when China wakes up, there is a lot of price change, so volatile is high because it is multinational.

Not only traders could take advantages if having high price but to all who have being a part of bitcoin.
Two main reasons why bitcoin so volatile and there is always price fluctuation due to supply and demand in the market. Because a lot of investors and traders are coming but still its supply are limited only that's why bitcoin price still increasing.

[CoinsCoinsEverywhere]

Why Is Bitcoin's Value So Volatile? I am confused to buy bitcoin now when it's value is too high.

As many others have said here, the decentralized nature of the bitcoin is part of the reason for the extreme volatility.  There's no centralized entity, like a reserve bank, that can act to dampen the price swings.  Traders/speculators that are constantly buying and selling have an impact on the hour-to-hour price.  And the general lack of liquidity exacerbates the moves.

But one thing that I think most people are missing here is that there's no good way to determine the actual value of a bitcoin.  The value of other currencies is determined by the economies they represent.  The value of commodities (oil, gold, etc.) can be estimated from the amount of time/effort/resources/money that's required to obtain them.  But bitcoin doesn't have anything like that backing it, so there's no way to form a consensus on what it's value should be.  Without that, price is going to continue to swing wildly.

I think it’s natural for any currency either virtual or physical to be volatile because everything in the universe has ups and down. In case of bit coin, volatility is more visible because of increased number investors in it. As people are getting aware of crypto currencies, they have started investing in it to make huge profits in future.

Yes, all financial instruments have ups and downs.  But almost nothing has such crazy swings as bitcoin (and other cryptos), unless something catastrophic happens that throws markets into chaos.  For most fiat currencies, it's a big deal if they move by 1% in a day.  For bitcoin, it's a big deal if it doesn't move by 1% in an hour.  Most other financial markets have more investors than bitcoin, but their prices don't fluctuate nearly as much.  The volatility here ins't because there are more investors; it's because of the type of investors that are being attracted (i.e., make-a-quick-buck-and-get-out traders).

[xSkylarx]

The value of bitcoin is so volatile because the market is controlled by the whales or the manipulators who have a lot of bitcoin in their wallet and they are all focused in manipulating the market so they can control and make a lot of profit even the market is falling down or not.

[Reid]

The value of bitcoin is so volatile because the market is controlled by the whales or the manipulators who have a lot of bitcoin in their wallet and they are all focused in manipulating the market so they can control and make a lot of profit even the market is falling down or not.

Considering what happened to the FUD that have been spread, even if they are not whales if a large percentage of the users in those exchanges suddenly withdraw then it could be a big impact with the price and we can see that now. Just a little sh1tty news and everything is changing with the price. That is why I always think that even low amount holders are valuable with the bitcoin price.

[lobo13hf]

The value of bitcoin is so volatile because the market is controlled by the whales or the manipulators who have a lot of bitcoin in their wallet and they are all focused in manipulating the market so they can control and make a lot of profit even the market is falling down or not.

they manipulate the market by spreading fud, they can't manipulate it through their money because bitcoin have currently the biggest marketcap in history of cryptocurrency ever, only bill gates could control or manipulate the market of bitcoin.
FUD is the most efficient way and that's way many of them currently spreading.

[deisik]

Since Bitcoin isn't yet adopted in most places, a large part of its supply and demand is based on price speculation.  So as the confidence changes, the price fluctuates a lot.  As its adoption increases and people send or receive payments for commerce instead of speculating on its price, it should be less volatile.

Even if adoption would help price stability, bitcoin is caught in a paradox. More stability may require more adoption, but more adoption (especially with respect to using it for commerce) will require more stability.  It's very hard to use a currency for retail purchases that can change value with respect to fiat by 1% in a minute.  Why would I use btc to buy something when there's a significant chance that it could cost a couple percent more by the time I actually complete the purchase?

This is not a paradox

I guess it should rather be called a vicious circle of sorts, where cause and effect depend on each other and intensify each other. In this case, merchants aren't accepting Bitcoin because it is too volatile while it is volatile because its adoption among merchants is too low. But ultimately, the real cause of this self-sustaining loop is low competitiveness of Bitcoin in comparison with fiat currencies. If it could offer something really valuable which fiat monies can't, it would quickly get accepted and its volatility would diminish significantly

[Siopao]

Bitcoin's value is very volatile, the fact that it is decentralize and not regulated is one of the reasons for its unstable value. It also depends with the supply and demand of users, if investors sell their bitcoin then there will be huge supply that can affect and make the price low and that is a good time to trade until the supply is low that eventually will make the price goes up again. It just like a cycle, so if for a time the value hits low, don't fret because surely it's value will rise again.

[leyton11]

Why Is Bitcoin's Value So Volatile? I am confused to buy bitcoin now when it's value is too high.

I think it´s a very young investment with small real life use cases. So being a speculative asset it´s normal to have very big variations in price. That what makes it fun and is atracting so many people:)

Yes an speculative asset that makes people attracts bitcoin. Bitcoin value is volatile because there are many who  suppprts bitcoin. Which invested in, continues to buy and sell on bitcoin that makes it volatile. So the demand is increasing in bitcoin.

The demand of Bitcoin just increases when the price of it increases every day, does not like now the price of Bitcoin only decreases more. But still have some traders can keep their calm for Bitcoin in dips price, because they are smart investors and know that time is best time for spend their money to invest into Bitcoin.

[CoinsCoinsEverywhere]

Since Bitcoin isn't yet adopted in most places, a large part of its supply and demand is based on price speculation.  So as the confidence changes, the price fluctuates a lot.  As its adoption increases and people send or receive payments for commerce instead of speculating on its price, it should be less volatile.

Even if adoption would help price stability, bitcoin is caught in a paradox. More stability may require more adoption, but more adoption (especially with respect to using it for commerce) will require more stability.  It's very hard to use a currency for retail purchases that can change value with respect to fiat by 1% in a minute.  Why would I use btc to buy something when there's a significant chance that it could cost a couple percent more by the time I actually complete the purchase?

This is not a paradox

I guess it should rather be called a vicious circle of sorts, where cause and effect depend on each other and intensify each other. In this case, merchants aren't accepting Bitcoin because it is too volatile while it is volatile because its adoption among merchants is too low.

That's what a logical paradox is.  Catch-22 would be another way of describing this (please see https://en.wikipedia.org/wiki/Catch-22_(logic)).  A won't happen until B does, but B can't happen until A does.

I do mean this somewhat loosely, of course.  If enough merchants are willing to take on the risk of volatility now in the hopes of promoting future stability, then it could work.

But ultimately, the real cause of this self-sustaining loop is low competitiveness of Bitcoin in comparison with fiat currencies. If it could offer something really valuable which fiat monies can't, it would quickly get accepted and its volatility would diminish significantly

I guess it would depend on what it ends up offering.  I can't see price stabilizing without some way of getting everyone to agree on a specific value for a bitcoin.  It needs to be tied to something.  Otherwise speculators will just keep jerking the price around.

[swiftblade]

well bitcoin is still young despite being around for a while. and that makes its market still young and small too. because of it, this market can be easily affected or manipulated even with different news which sometimes makes people uneasy and causes wild reactions to the price, which then you see as the volatility.

but this doesn't make bitcoin any more unpredictable than it should be. we can still speculate about its future or even the short term fluctuations.

And its because people on crowd controlling bitcoin. It and other cryptocurrencies need more time to find their original-stable value. As we know Bitcoin start distribute on market since 2009, 9 years is short duration. Even if comparize for human age, its still Elementary School.

And Because there is no Father/government (decentralized), the price is volatile untill bitcoin reach teenagers or adult Age. Maybe 10 or 20 years, even more.

[mornabo]

Why Is Bitcoin's Value So Volatile? I am confused to buy bitcoin now when it's value is too high.

I think it´s a very young investment with small real life use cases. So being a speculative asset it´s normal to have very big variations in price. That what makes it fun and is atracting so many people:)

Yes an speculative asset that makes people attracts bitcoin. Bitcoin value is volatile because there are many who  suppprts bitcoin. Which invested in, continues to buy and sell on bitcoin that makes it volatile. So the demand is increasing in bitcoin.

I think total users also affect to the fluctuations and price changes in bitcoins. when bitcoin users are still a small number then fluctuations will occur because the demand and supply is still small. but when the total bitcoin users are very large covering all people around the world of course marketcap or demand and supply will be very large and result in slowing price changes bitcoin in the market

[Lmaooo]

Why Is Bitcoin's Value So Volatile? I am confused to buy bitcoin now when it's value is too high.

It's based on bitcoin demand. Whenever there is a high demand of bitcoin with few sellers the value gets higher. And whenever there is panic in the heart of the people, people will start selling Bitcoins with less buyers and the value drops.