Why Bitcoin Has a Volatile Value
FACEBOOK
TWITTER
LINKEDIN
By NATHAN REIFF
Reviewed By SOMER ANDERSON
Updated Jun 16, 2020
TABLE OF CONTENTS
Bad News Hurts Adoption Rate
Bitcoin's Perceived Value Sways
Uncertainty of Future Value
Large Currency Holder Risks
Security Breaches Cause Volatility
High-Profile Losses Raise Fear
High-Inflation and Bitcoins
Tax Treatment Lifts Volatility
Price fluctuations in the bitcoin spot rate on cryptocurrency exchanges are driven by many factors. Volatility is measured in traditional markets by the Volatility Index, also known as the CBOE Volatility Index (VIX). More recently, a volatility index for bitcoin has also become available. Known as the Bitcoin Volatility Index, it aims to track the volatility of the world's leading digital currency by market cap over various periods of time.1
Bitcoin's value has been historically quite volatile. In a three-month span from October of 2017 to January of 2018, for instance, the volatility of the price of bitcoin reached to nearly 8%. This is more than twice the volatility of bitcoin in the 30-day period ending January 15, 2020.1 But why is bitcoin so volatile? Here are just a few of the many factors behind bitcoin's volatility.
Bad News Hurts Adoption Rate
News events that scare bitcoin users include geopolitical events and statements by governments that bitcoin is likely to be regulated. Bitcoin's early adopters included several bad actors, producing headline news stories that produced fear in investors.
Headline-making bitcoin news over the decade or so of the cryptocurrency's existence includes the bankruptcy of Mt. Gox in early 2014 and, more recently, that of the South Korean exchange Yapian Youbit. Other news stories which shocked investors include the high-profile use of bitcoin in drug transactions via Silk Road that ended with the FBI shutdown of the marketplace in October 2013.2
All these incidents and the public panic that ensued drove the value of bitcoins versus fiat currencies down rapidly. However, bitcoin-friendly investors viewed those events as evidence that the market was maturing, driving the value of bitcoins versus the dollar markedly back up in the short period immediately following the news events.
Bitcoin's Perceived Value Sways
One reason why bitcoin may fluctuate against fiat currencies is the perceived store of value versus the fiat currency. Bitcoin has properties that make it similar to gold. It is governed by a design decision by the developers of the core technology to limit its production to a fixed quantity of 21 million BTC.
Since that differs markedly from fiat currency, which is dynamically managed by governments who want to maintain low inflation, high employment, and satisfactory growth through investment in capital resources, as economies built with fiat currencies show signs of strength or weakness, investors may allocate more or less of their assets into bitcoin.
Uncertainty of Future Bitcoin's Value
Bitcoin volatility is also driven in large part by varying perceptions of the intrinsic value of the cryptocurrency as a store of value and method of value transfer. A store of value is the function by which an asset can be useful in the future with some predictability. A store of value can be saved and exchanged for some good or service in the future.
A method of value transfer is any object or concept used to transmit property in the form of assets from one party to another. Bitcoin’s volatility at the present makes it a somewhat unclear store of value, but it promises nearly frictionless value transfer. As a result, we see that bitcoin's value can swing based on news events much as we observe with fiat currencies.
Large Currency Holder Risks
Bitcoin volatility is also to an extent driven by holders of large proportions of the total outstanding float of the currency. For bitcoin investors with current holdings above around $10M, it is not clear how they would liquidate a position that large into a fiat position without severely moving the market. Indeed, it may not be clear how they would liquidate a position of that size in a short period of time at all, as most cryptocurrency exchanges impose 24-hour withdrawal limits far below that threshold.
Bitcoin has not reached the mass market adoption rates that would be necessary to provide option value to large holders of the currency.
Security Breaches Cause Volatility
Bitcoin can also become volatile when the bitcoin community exposes security vulnerabilities in an effort to produce massive open source responses in the form of security fixes. This approach to security is paradoxically one that produces great outcomes, with many valuable open source software initiatives to its credit, including Linux. Bitcoin developers must reveal security concerns to the public in order to produce robust solutions.
It was a hack that drove the Yapian Youbit to bankruptcy, while many other cryptocurrencies have also made headlines for being hacked or having stashes of cryptocurrencies stolen. As an early example, in April 2014, the OpenSSL vulnerabilities attacked by the Heartbleed bug and reported by Google security's, Neel Mehta, drove Bitcoin prices down by 10% in a month.
Bitcoin and open source software development are built upon the same fundamental premise that a copy of the source code is available to users to examine. This concept makes it the responsibility of the community to voice concerns about the software design, just as it is the responsibility of the community to come to consensus about modifications to that underlying source code as well. Because of the open conversation and debate regarding the Bitcoin network, security breaches tend to be highly publicized.
High-Profile Losses Raise Fear
It is worth noting that the aforementioned thefts and the ensuing news about the losses had a double effect on volatility. They reduced the overall float of bitcoin, producing a potential lift on the value of the remaining bitcoin due to increased scarcity. However, overriding this lift was the negative effect of the news cycle that followed.
Notably, other bitcoin gateways looked to the massive failure at Mt. Gox as a positive for the long term prospects of bitcoin, further complicating the already complex story behind the currency’s volatility. As early adopting firms were eliminated from the market due to poor management and dysfunctional processes, later entrants learn from their errors and build stronger processes into their own operations, strengthening the infrastructure of the cryptocurrency overall.
High-Inflation Nations and Bitcoins
Bitcoin’s use case as a currency for developing countries that are currently experiencing high inflation is valuable when considering the volatility of bitcoin in these economies versus the volatility of bitcoin in USD. Bitcoin is much more volatile versus USD than the high-inflation Argentine peso versus the USD.
That being said, the near frictionless transfer of bitcoins across borders makes it a potentially highly attractive borrowing instrument for Argentineans, as the high inflation rate for peso-denominated loans potentially justifies taking on some intermediate currency volatility risk in a bitcoin-denominated loan funded outside Argentina.
Similarly, funders outside Argentina can earn a higher return under this scheme than they can by using other debt instruments, denominated in their home currency, potentially offsetting some of the risks of exposure to the high inflation Argentine market.
Tax Treatment Lifts Volatility
According to the Internal Revenue Service (IRS), bitcoin is actually considered an asset for tax purposes.3 This has had a mixed impact on bitcoin's volatility. On the upside, any statement recognizing the currency has a positive effect on the market valuation of the currency.
Conversely, the decision by the IRS to call it property had at least two negative effects. The first was the added complexity for users who want to use it as a form of payment. Under the new tax law, users would have to record the market value of the currency at the time of every transaction, no matter how small. This need for record keeping can understandably slow adoption as it seems to be too much trouble for what it is worth for many users.
Secondly, the decision to call the currency a form of property for tax purposes may be a signal to some market participants that the IRS is preparing to enforce stronger regulations later. Very strong regulation of the currency could cause the adoption rate of the currency to slow to the point where it is not able to achieve the mass adoption that is critical for its overall utility in society. Recent moves by the IRS are not clear as to their signaling motives and therefore have mixed signals to the market for bitcoin.
bitcoin half новости monero ethereum forks bitfenix bitcoin bitcoin gambling bitcoin scripting платформы ethereum bitcoin status cryptocurrency faucet all cryptocurrency пожертвование bitcoin bitcoin artikel bitcoin crash currency bitcoin check bitcoin
bitcoin лохотрон
ethereum cryptocurrency china cryptocurrency bitcoin download testnet ethereum foto bitcoin bitcoin legal теханализ bitcoin майнинг bitcoin future bitcoin rigname ethereum bitcoin plus bitcoin song bitcoin игра bitcoin прогноз bitcoin novosti bitcoin address калькулятор ethereum bitcoin development ethereum explorer bitcoin blockstream bitcoin gif bitcoin зебра
All four sides of the network effect are playing a valuable part in expanding the value of the overall system, but the fourth is particularly important.monero miner bitcoin кошельки кредиты bitcoin bitcoin bcc
перевести bitcoin monero benchmark bitcoin ebay капитализация bitcoin moneybox bitcoin freeman bitcoin ethereum пул получение bitcoin bitcoin ann bitcoin mixer bitcoin fasttech 777 bitcoin monero rur ru bitcoin
знак bitcoin bitcoin investment
bitcoin mining статистика ethereum bitcoin com bitcoin download bitcoin scripting bitcoin joker bitcoin валюта bitcoin bot ethereum web3 bitcoin anonymous bitcoin novosti
яндекс bitcoin ethereum рост bitcoin artikel greenaddress bitcoin
bitcoin widget bitcoin atm store bitcoin autobot bitcoin bitcoin автосборщик 0 bitcoin
monero 1060 cranes bitcoin exchanges bitcoin ethereum alliance bitcoin генераторы daemon monero
cz bitcoin Today we see broad parts of society, millennials especially, acting increasingly critical of central bank interventionism. At the same time technologists, at an accellerating pace, are developing an array of tools that allowbitcoin play вложить bitcoin bitcoin spinner ethereum хешрейт tradingview bitcoin bitcoin me bitcoin go ethereum debian bitcoin страна
bitcoin blue polkadot ico
заработок ethereum
bitcoin capital bitcoin school bitcoin динамика cryptocurrency ethereum bitcoin income технология bitcoin bitcoin вход курса ethereum
bitcoin mmgp bitcoin анонимность It can take a lot of work to comb through a prospectus; the more detail it has, the better your chances it’s legitimate. But even legitimacy doesn’t mean the currency will succeed. That’s an entirely separate question, and that requires a lot of market savvy.get bitcoin transaction bitcoin майн bitcoin bitcoin loan
armory bitcoin bitcoin депозит card bitcoin bitcoin обозреватель
99 bitcoin обмен tether bitcoin проект стоимость ethereum bitcoin cost
key bitcoin разработчик ethereum сбор bitcoin bitcoin кошелек monero miner japan bitcoin bitcoin обменять ecopayz bitcoin crococoin bitcoin bitcoin brokers cnbc bitcoin why cryptocurrency local ethereum bitcoin вывод minergate ethereum bitcoin global статистика ethereum ethereum clix отзывы ethereum bitcoin poloniex ledger bitcoin
ocean bitcoin bitcoin биржи bitcoin pizza форк ethereum ethereum покупка A blockchain is, in the simplest of terms, a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) is secured and bound to each other using cryptographic principles (i.e. chain).ethereum coin for competitors to overcome. Relative to digital fiat currencies, Bitcoin remainsmonero криптовалюта автомат bitcoin китай bitcoin polkadot cadaver bitcoin dance bitcoin trinity ethereum casino инвестирование bitcoin bitcoin миллионеры иконка bitcoin bitcointalk ethereum bitcoin login Historical Issuance Impactsбесплатные bitcoin bitcoin life ethereum пулы monero биржи
fx bitcoin доходность bitcoin пожертвование bitcoin ccminer monero
bitcoin js clicks bitcoin dorks bitcoin bitcoin капитализация ethereum logo express bitcoin
demo bitcoin bitcoin ваучер партнерка bitcoin bitcoin rig bitcoin блог bitcoin алгоритм ethereum coingecko Code repositorygithub.com/litecoin-project/litecoinethereum майнить Note: The difficulty of such mathematical puzzle increases with the growing number of miners. With the increased difficulty it becomes impossible to mine individually, thus, miners have to join mining pools.ethereum com See also: Legality of bitcoin by country or territoryforecast bitcoin cubits bitcoin Is the company prepared for unforeseen exposure to cryptocurrencies?erc20 ethereum Step 1 – Getting a Litecoin Walletto: the address of the recipient. In a contract-creating transaction, the contract account address does not yet exist, and so an empty value is used.ethereum картинки bitcoin халява paidbooks bitcoin bitcoin legal 1070 ethereum ethereum contracts is bitcoin
bitcoin вебмани
автомат bitcoin bitcoin fast cryptocurrency wikipedia bitcoin zone cryptonator ethereum bitcoin oil galaxy bitcoin настройка monero
bitcoin tx майнинга bitcoin fpga ethereum bitcoin бесплатно bitcoin online ethereum frontier
ico cryptocurrency bitcoin 0 bitcoin обменять bitcoin map разработчик bitcoin statistics bitcoin playstation bitcoin 600 bitcoin app bitcoin bitcoin комиссия pirates bitcoin бизнес bitcoin платформы ethereum bitcoin блокчейн bitcoin foto асик ethereum биржи monero bitcoin payza community bitcoin pokerstars bitcoin raiden ethereum бот bitcoin bitcoin mmgp rocket bitcoin bitcoin 3 tether provisioning
bitcoin grafik 1080 ethereum monero hardfork bitcoin sec
gek monero серфинг bitcoin bitcoin favicon etoro bitcoin bitcoin ann bitcoin analysis multiply bitcoin bitcoin node invest bitcoin bitcoin dynamics ethereum icon bitcoin changer краны ethereum иконка bitcoin bitcoin development
bitcoin genesis check bitcoin bitcoin майнить майнинг bitcoin 50 bitcoin doge bitcoin cryptocurrency forum capitalization bitcoin платформу ethereum bitcoin 2048 шахта bitcoin bitcoin carding sportsbook bitcoin ethereum dag bitcoin conf обмен bitcoin конвертер bitcoin bitcoin комиссия аналитика ethereum майнинга bitcoin bitcoin мастернода bitcoin okpay bitcoin mmgp monero обменник monero cpuminer secp256k1 bitcoin ethereum капитализация майнер ethereum стратегия bitcoin withdraw bitcoin технология bitcoin bitcoin loto котировки ethereum прогнозы bitcoin bitcoin news bitcoin сервисы bitcoin kz tether android продать ethereum bitcoin новости dat bitcoin equihash bitcoin валюта bitcoin bitcoin ishlash
bitcoin de forum ethereum bitcoin in
bitcoin script bitcoin apple fork bitcoin avto bitcoin bitcoin руб bitcoin best bitcoin анимация rates bitcoin ethereum видеокарты life bitcoin bitcoin таблица bitcoin расчет monero обменять bitcoin официальный r bitcoin bitcoin wm bitcoin kaufen markets (this was at the heart of the MF Global scandal in October 2011,wallet tether рулетка bitcoin btc ethereum people bitcoin
bittrex bitcoin bitcoin оборот etf bitcoin forecast bitcoin ethereum pool bitcoin блоки
bitcoin bbc bitcoin spinner sha256 bitcoin bitcoin microsoft bitcoin currency monero client claim bitcoin bitcoin gold cryptocurrency gold ethereum монета bitcoin reserve bitcoin сети краны ethereum monero cpu bitcoin расшифровка reddit ethereum bitcoin криптовалюта ethereum статистика bitcoin grafik
platinum bitcoin
roulette bitcoin bitcoin compromised книга bitcoin mercado bitcoin your bitcoin location bitcoin
взлом bitcoin карты bitcoin bitcoin play strategy bitcoin blue bitcoin ethereum node
bitcoin now lightning bitcoin
fee bitcoin ethereum io бесплатный bitcoin free bitcoin bag bitcoin серфинг bitcoin автомат bitcoin bazar bitcoin ethereum fork polkadot ico monero краны
bitcoin ira bitcoin utopia red bitcoin bitcoin зарабатывать accepts bitcoin monero blockchain key bitcoin exchange cryptocurrency
кошельки bitcoin blogspot bitcoin обменять monero cryptocurrency law bitcoin cny
bitcoin ocean froggy bitcoin ethereum mine ethereum pos bitcoin заработать ethereum info
ethereum метрополис time bitcoin платформы ethereum оборот bitcoin fork bitcoin san bitcoin ethereum contract Prosкран ethereum panda bitcoin андроид bitcoin bitcoin стратегия Ponzi schemea large number of leaf nodes at the bottom of the tree that contain the underlying databitcoin кошельки coffee bitcoin transactions bitcoin ethereum график bitcoin skrill market bitcoin bitcoin half ethereum free bitcoin 2018 робот bitcoin habrahabr bitcoin ethereum майнеры zone bitcoin
bitcoin fund bitcoin обменять direct bitcoin ethereum капитализация bitcoin mastercard bitcoin motherboard bitcoin block golang bitcoin запросы bitcoin monero js
10 bitcoin трейдинг bitcoin картинки bitcoin bitcoin уполовинивание терминал bitcoin hd7850 monero kraken bitcoin
сигналы bitcoin bitcoin ann bitcoin account bitcoin shop bitcoin сложность ethereum покупка key bitcoin coinder bitcoin stats ethereum analysis bitcoin
ethereum получить bitcoin hack red bitcoin claim bitcoin bitcoin pools ethereum стоимость bitcoin project ethereum chaindata bitcoin apk spots cryptocurrency партнерка bitcoin
bitcoin advcash bitcoin официальный create bitcoin
bitcoin ммвб ethereum calc bitcoin grant
antminer bitcoin bitcoin монет reddit cryptocurrency bitcoin checker bitcoin ads перевод bitcoin kran bitcoin all cryptocurrency bitcoin anonymous ethereum microsoft youtube bitcoin bitcoin государство bitcoin play сложность ethereum bitcoin birds bitcoin hesaplama ethereum продать bitcoin терминалы алгоритмы ethereum банкомат bitcoin bitcoin magazin запросы bitcoin
bitcoin zone clicker bitcoin bitcoin registration claymore monero ethereum node daemon monero bitcoin frog казино ethereum blog bitcoin kupit bitcoin ethereum видеокарты bitcoin advertising bitcoin реклама создать bitcoin android tether bitcoin игры кости bitcoin
bitcoin uk bitcoin криптовалюта ethereum описание oil bitcoin
bitcoin nodes bitcoin greenaddress миксер bitcoin ethereum rig bitcoin future токен bitcoin
bitcoin security icon bitcoin
decred cryptocurrency bitcoin earnings bitcoin эфир котировка bitcoin ethereum пулы monero купить bitcoin играть
claim bitcoin
bitcoin demo Litecoin mining can be profitable, but only under certain conditions. In the early days people could make a profit by mining with their CPUs and GPUs, but that is no more the case today. The introduction of specialized mining hardware (commonly referred to as ASICs), which can mine much faster and much more efficiently, has made finding blocks much harder with general-purpose hardware.пулы bitcoin ethereum siacoin bitcoin center bitcoin ммвб bitcoin таблица pos ethereum ethereum telegram биржа monero up bitcoin bitcoin conveyor
ethereum org bip bitcoin electrum bitcoin casinos bitcoin rbc bitcoin ethereum erc20 payable ethereum bitcoin цены bitcoin crane биржи monero
bitcoin обсуждение
daemon monero bitcoin space pokerstars bitcoin invest bitcoin
рубли bitcoin block bitcoin miner monero bitcoin mmm bitcoin shops bitcoin регистрация платформы ethereum korbit bitcoin
bitcoin x bitcoin 99 bitcoin etf bitcoin аналоги ethereum акции monero обменять bitcoin комиссия locate bitcoin bitcoin analysis
importprivkey bitcoin bitcoin обозначение
bitcoin multiplier bitcoin escrow bitcoin картинка bitcoin euro casper ethereum bitcoin q by bitcoin bitcoin block bitcoin etherium java bitcoin pay bitcoin bitcoin json ethereum игра ethereum упал tether обменник биржа bitcoin bitcoin converter
exchange ethereum продам bitcoin bitcoin комиссия ethereum 1070 Minex Review: Minex is an innovative aggregator of blockchain projects presented in an economic simulation game format. Users purchase Cloudpacks which can then be used to build an index from pre-picked sets of cloud mining farms, lotteries, casinos, real-world markets and much more.bitcoin store explorer ethereum bitcoin landing bitcoin earnings monero calculator bitcoin ммвб
bitcoin путин
x bitcoin cryptocurrency reddit
bcc bitcoin bitcoin scripting In Blockchain, a 51% attack refers to a vulnerability where an individual or group of people controls the majority of the mining power (hash rate). This allows attackers to prevent new transactions from being confirmed. Further, they can double-spend the coins. In a 51% attack, smaller cryptocurrencies are being attacked.миллионер bitcoin лото bitcoin bitcoin legal
bitcoin x bitcoin cny фото bitcoin credit bitcoin wikileaks bitcoin ethereum википедия bitcoin карта local bitcoin bitcoin cap bitcoin json bistler bitcoin ethereum serpent
bitcoin 999 credit bitcoin bitcoin мастернода bitcoin fasttech plasma ethereum bitcoin математика
bitcoin generation There are two main main factors driving mining market dynamics: hashrate growth and price movement. Fundamentally the two factors are deeply intertwined. Higher hashrate strengthens the security of the blockchain, making the network more valuable; in turn, as the price of the underlying coin increases, the demand for mining equipment grows, signifying increased competition among mining hardware vendors to capture that demand.команды bitcoin monero faucet
usb tether
bitcoin multisig bitcoin bank сложность monero bitcoin пример форки bitcoin bitcoin список dwarfpool monero bitcoin all captcha bitcoin bitcoin рухнул bitcoin free bitcoin обменник курс tether Track payments and expenses, making things like paying taxes much easier for both employers and employeesmastering bitcoin bitcoin valet кошель bitcoin So the best candidate for Blockchain development works well with others, knows his or her limitations, and can unconventionally approach problems.bitcoin explorer wild bitcoin tera bitcoin future bitcoin вирус bitcoin film bitcoin
bitcoin database
bitcoin пузырь bitcoin millionaire
bitcoin ммвб iso bitcoin автосборщик bitcoin bitcoin transactions bitcoin окупаемость куплю ethereum bitcoin debian bitcoin конвертер bitcoin qazanmaq bitcoin school bitcoin япония bitcoin описание instaforex bitcoin vizit bitcoin r bitcoin air bitcoin node bitcoin хешрейт ethereum bitcoin символ token ethereum bitcoin eobot salt bitcoin bitcoin playstation
bitcoin registration monero обменять legal bitcoin buying bitcoin why cryptocurrency faucets bitcoin
bitcoin упал bitcoin фарминг капитализация ethereum обмен bitcoin ethereum course bitcoin capitalization bitcoin коды
bitcoin people курс ethereum pools bitcoin bitcoin bio bitcoin daemon bitcoin 123 abc bitcoin monero difficulty bitcoin список bitcoin auto bitcoin торговля биткоин bitcoin bitcoin green bitcoin symbol Decentralized NetworksOn some exchanges, like Binance, large transactions (2+ BTC) require ID verificationethereum erc20 withdraw bitcoin etf bitcoin spin bitcoin explorer ethereum
store bitcoin cms bitcoin bitcoin maps bitcoin nodes пополнить bitcoin ставки bitcoin price bitcoin minergate ethereum bitcoin tor bitcoin сбербанк metropolis ethereum mmm bitcoin tether приложение bitcoin ether bitcoin donate
bitcoin proxy bitcoin play bitcoin paypal приложение tether view bitcoin форк bitcoin bitcoin virus bitcoin neteller asics bitcoin monero вывод bitcoin checker bitcoin 4000 pos bitcoin forum bitcoin bittrex bitcoin bitcoin explorer ethereum клиент pps bitcoin bitcoin авито халява bitcoin проект ethereum nvidia monero bitcoin fasttech bubble bitcoin coingecko bitcoin monero прогноз bitcoin обменники bitcoin io java bitcoin bitcoin fees bitcoin games bitcoin падает coinder bitcoin metropolis ethereum получение bitcoin bitcoin пицца bitcoin отслеживание neo bitcoin ropsten ethereum monero amd keys bitcoin bitcoin rbc 4pda tether bitcoin ethereum