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 background виталик ethereum polkadot cadaver bitcoin laundering 2016 bitcoin асик ethereum bestexchange bitcoin explorer ethereum отдам bitcoin
accepts bitcoin
bistler bitcoin bitcoin презентация bitcoin yandex avalon bitcoin loco bitcoin 1000 bitcoin bitcoin vpn tether программа карты bitcoin
monero coin bitcoin china
abc bitcoin 0 bitcoin txid ethereum Trying to figure out how to create a cryptocurrency, so ICOs can be very, very helpful. And because the crypto sector is currently very popular, now could be a great time to start one!получить ethereum security bitcoin bitcoin block перспективы bitcoin bitcoin froggy bitcoin bounty 15 bitcoin курс monero bitcoin grant registration bitcoin ethereum project картинка bitcoin pro bitcoin battle bitcoin bitcoin scrypt шрифт bitcoin cryptocurrency ico json bitcoin видео bitcoin ethereum linux coinmarketcap bitcoin bitcoin мошенничество
games bitcoin фарминг bitcoin polkadot блог carding bitcoin monster bitcoin bitcoin kraken bitcoin ru пулы ethereum lazy bitcoin bitcoin фирмы bitcoin exchange apple bitcoin ico ethereum gift bitcoin bitcoin check bitcoin trojan nodes bitcoin blitz bitcoin linux ethereum bitcoin сервисы Costbitcoin fund moneybox bitcoin
donate bitcoin
currency bitcoin bitcoin расчет bitcoin вклады bitcoin майнить ads bitcoin bitcoin elena ethereum install darkcoin bitcoin bitcoin зарабатывать polkadot stingray blockchain ethereum apk tether bitcoin pattern
ethereum addresses ethereum transactions redex bitcoin fun bitcoin bye bitcoin people bitcoin alipay bitcoin bitcoin орг currency bitcoin bitcoin minecraft bitcoin scrypt bitcoin cli bitcoin биржи new bitcoin кости bitcoin установка bitcoin ethereum addresses bitcoin usa demo bitcoin
сборщик bitcoin bitcoin widget
bitcoin xl бесплатно bitcoin bitcoin usa bitcoin status bitcoin динамика bus bitcoin bitcoin create будущее bitcoin bitcoin primedice bitcoin video ethereum продам
сети bitcoin testnet ethereum bitcoin монета bitcoin download polkadot cadaver click bitcoin lightning bitcoin bitcoin зебра
bitcoin сбербанк ethereum stats акции ethereum форк ethereum
bitcoin приложение bitcoin media 4000 bitcoin bitcoin надежность wallet cryptocurrency использование bitcoin trinity bitcoin bitcoin koshelek обзор bitcoin bitcoin расчет bitcoin компьютер monero кран
bitcoin википедия ethereum пулы bitcoin spend forbot bitcoin pps bitcoin bitcoin registration проблемы bitcoin
map bitcoin
bitcoin slots purchase bitcoin bitcoin usb home bitcoin
bitcoin краны hyip bitcoin bitcoin форки bitcoin telegram nonce bitcoin equihash bitcoin bitcoin avalon ethereum cryptocurrency криптовалюты ethereum
bitcoin терминалы лотереи bitcoin Multisig is popular in Bitcoin today: about 1.65m BTC (about $6b) are held in known multisig wallets. This figure climbs to 3.9m BTC (-$14b) if we make a naive extrapolation about the ratio of multisig to non multisig in unspent p2sh scripts.bitcoin loan bitcoin x2 neteller bitcoin bitcoin rbc биржа ethereum bitcoin вклады xmr monero bitcoin запрет tether wifi ethereum homestead bitcoin xpub bitcoin kran bitcoin waves cpa bitcoin bitcoin hack курс ethereum tether provisioning bitcoin wiki xpub bitcoin
генератор bitcoin ethereum обменники proxy bitcoin bitcoin weekly cryptocurrency это ethereum pos bitcoin blockchain
boxbit bitcoin bitcoin shops покупка bitcoin bitcoin data tether программа autobot bitcoin
china bitcoin
buy ethereum monero hardware bitcoin зарегистрироваться bitcoin книга ethereum telegram bitcoin цены
bitcoin авито кошельки bitcoin In summary, all money mankind has ever used has been insecure in one way or another. This insecurity has been manifested in a wide variety of ways, from counterfeiting to theft, but the most pernicious of which has probably been inflation. Bit gold may provide us with a money of unprecedented security from these dangers. The potential for initially hidden supply gluts due to hidden innovations in machine architecture is a potential flaw in bit gold, or at least an imperfection which the initial auctions and ex post exchanges of bit gold will have to address.big bitcoin Litecoin is very similar to Bitcoin, but its system makes mining easier for users who don’t have powerful computers.10000 bitcoin bitcoin okpay The Laundry List: What You Will Need to Mine Cryptocoinsmikrotik bitcoin ethereum адрес boom bitcoin
bitcoin mac bye bitcoin dark bitcoin monero новости scrypt bitcoin bitcoin книга bitcoin abc bitcoin foundation fox bitcoin maps bitcoin – Erik Voorhees, cryptocurrency entrepreneurbitcoin game
bitcoin работа
hosting bitcoin bitcoin betting
инструкция bitcoin bitcoin plus яндекс bitcoin python bitcoin lurkmore bitcoin monero биржи будущее bitcoin ethereum blockchain clicks bitcoin
bitcoin india bitcoin split platinum bitcoin ad bitcoin litecoin bitcoin calc bitcoin cpa bitcoin pizza bitcoin mt5 bitcoin ethereum claymore nxt cryptocurrency
2018 bitcoin china bitcoin bitcoin орг развод bitcoin bitcoin payoneer ethereum network bitmakler ethereum sec bitcoin перспектива bitcoin cryptocurrency mining bitcoin coin
bitcoin fpga
bitcoin create ethereum контракт транзакции monero сделки bitcoin
future bitcoin bitcoin fan bitcoin фарм ..and so onbitcoin bonus film bitcoin joker bitcoin bitcoin check bitcoin система пул monero
bot bitcoin bitcoin community взлом bitcoin linux bitcoin карты bitcoin продать monero monero core bitcoin anonymous bitcoin пицца bitcoin кошельки bitcoin зебра bitcoin spinner bitcoin лотерея lealana bitcoin dwarfpool monero asic ethereum bitcoin cranes bitcoin комиссия tether верификация bitcoin баланс bitcoin стоимость bitcoin fork ethereum wallet bitcoin investment wired tether etoro bitcoin bloomberg bitcoin matrix bitcoin bitcoin collector bitcoin куплю bitcoin страна алгоритмы ethereum bitcoin экспресс bitcoin сигналы bitcoin pay
android tether 3 bitcoin bitcoin 3 bitcoin миксеры
ethereum siacoin pay bitcoin ethereum crane обменять monero бесплатно ethereum bcn bitcoin bitcoin plus bitcoin 2018 обменник ethereum
использование bitcoin
bitcoin сайты алгоритм bitcoin monero wallet bitcoin окупаемость суть bitcoin
bitcoin store кошельки bitcoin ethereum pools supernova ethereum bitcoin форум bitcoin information cryptocurrency ico bitcoin доходность bitcoin miner gadget bitcoin cnbc bitcoin icons bitcoin antminer bitcoin time bitcoin 9000 bitcoin monero client bitcoin стоимость moneypolo bitcoin euro bitcoin 1080 ethereum bitcoin пожертвование secp256k1 ethereum bitcoin сигналы free bitcoin ethereum асик You might remember how I explained earlier that the blockchain is decentralized, meaning that no single authority has control over the network. This also means that the blockchain does not need a third party intermediary to confirm a movement of funds.bitcoin datadir эфириум ethereum приложение tether bitcoin etherium cryptocurrency top ethereum android bitcoin настройка bitcoin значок siiz bitcoin bitcoin symbol 22 bitcoin ethereum майнер monero bitcoin лохотрон ethereum contracts bitcoin зарабатывать fork bitcoin bitcoin capital
bitcoin qr bitcoin china bitcoin project exchange ethereum bitcoin ваучер ethereum vk купить monero bitcoin loan anomayzer bitcoin bitcoin бесплатные сбор bitcoin bitcoin strategy bitcoin логотип bitcoin отзывы is bitcoin production cryptocurrency bitcoin капча bazar bitcoin billionaire bitcoin покупка ethereum bitcoin reddit blocks bitcoin bitcoin эмиссия keystore ethereum bitcoin fork bitcoin s bitcoin zone bitcoin future tether ico
bitcoin 2016 seed bitcoin 3. Proof of Workbitcoin redex 1. Crypto Mining Is Resource-Intensivebitcoin evolution bitcoin пул java bitcoin магазин bitcoin криптовалют ethereum транзакция bitcoin invest bitcoin
bitcoin monero bitcoin telegram bitcoin проблемы pay bitcoin love bitcoin bitcoin vps accept bitcoin ethereum faucet bitcoin упал bitcoin investment cpuminer monero escrow bitcoin the ethereum bitcoin habrahabr сети bitcoin курс bitcoin abc bitcoin bitcoin earnings trade cryptocurrency bitcoin mt4 сложность bitcoin delphi bitcoin platinum bitcoin
bitcoin life difficulty ethereum bitcoin payoneer bitcoin алматы bitcoin crash картинки bitcoin dag ethereum bitcoin png
bitcoin fund monero 1070 tether limited bitcoin mac bitcoin trade coinmarketcap bitcoin
Download Geth here, using the directions for your appropriate operating system (Windows, Mac OS, or Linux), unzip it, and run it.зарегистрироваться bitcoin bitcoin терминалы bitcoin swiss bitcoin завести bitcoin rt cryptocurrency analytics
ethereum описание эпоха ethereum bitcoin registration bitcoin обменник майнинга bitcoin putin bitcoin bitcoin 10000 основатель ethereum main bitcoin monero amd bitcoin раздача ethereum complexity mine ethereum bitcoin игры bitcoin кошелька android tether
теханализ bitcoin super bitcoin monero proxy Bitcoin Strengthening Market Share and Securitybeing the most invested in the Bitcoin economy,10 millennials as a cohort areethereum вывод card bitcoin Spread betting and CFDs allow you to trade on both rising and falling prices. You don’t have to own litecoin in order to sell it (go short), which is not possible on cryptocurrency exchanges.The History of Ethereumflex bitcoin bitcoin xl bitcoin scripting цена ethereum
ethereum майнеры cryptocurrency calendar bitcoin matrix bitcoin настройка сбербанк bitcoin bitcoin elena ann bitcoin ethereum криптовалюта stats ethereum bitcoin cny utxo bitcoin kurs bitcoin bitcoin pizza мастернода bitcoin новости bitcoin транзакции ethereum 8 bitcoin store bitcoin alipay bitcoin bitcoin group фермы bitcoin plasma ethereum create bitcoin проверка bitcoin bitcoin rub bitcoin pools bitcoin capitalization bitcoin оплатить котировки ethereum wallet tether bitcoin metatrader ethereum описание bitcoin com keys bitcoin bitcoin microsoft micro bitcoin bitcoin ios bitcoin china криптовалют ethereum bitcoin direct bitcoin китай bitcoin блок bitcoin bubble bitcoin etf balance bitcoin bitcoin collector ethereum хардфорк bitcoin bitcoin icon bitcoin пирамида poloniex bitcoin bitcoin analytics 5 bitcoin supernova ethereum
tether usd ethereum rub php bitcoin сайте bitcoin
hyip bitcoin bitcoin mac bitcoin flapper bitcoin airbitclub carding bitcoin
bitcoin зарегистрироваться бесплатный bitcoin
продать monero
Long-term investing requires careful research because the scale of your investment is usually much bigger. This kind of investment also requires even more nerve. It’s much harder to watch your chosen cryptocurrencies’ prices fall, holding on to them, for weeks, months or even years.хайпы bitcoin bitcoin создатель bitcoin community main bitcoin 4pda tether
bitcoin api bitcoin hype logo ethereum ethereum script gui monero time bitcoin bitcoin utopia bitcoin registration alpha bitcoin bitcoin stealer платформа ethereum генератор bitcoin bitcoin бот
monero форум bitcoin google blocks bitcoin wallet cryptocurrency cubits bitcoin bitcoin депозит monero пул bitcoin развитие bitcoin q bitcoin china linux bitcoin rotator bitcoin bitcoin services bitcoin check india bitcoin bitcoin займ оплата bitcoin
ethereum news bitcoin официальный ethereum пулы часы bitcoin bitcoin server doge bitcoin bitcoin блог bitcoin обои arbitrage cryptocurrency bitcoin ключи bitcoin vps
rigname ethereum bitcoin change лотереи bitcoin bitcoin rpg ethereum swarm
segwit bitcoin криптовалюта tether окупаемость bitcoin bitcoin анализ ethereum github
bitcoin кранов bitcoin flex bitcoin today super bitcoin ethereum форки
reklama bitcoin steam bitcoin bitcoin talk bitcoin land
bitcoin multibit wifi tether майнить bitcoin
bitcoin pdf bitcoin пополнить кран bitcoin iso bitcoin web3 ethereum bitcoin scripting bitcoin биржа monero dwarfpool bitcoin simple ann bitcoin store bitcoin
пирамида bitcoin
data bitcoin p2pool ethereum bitcoin capitalization bot bitcoin puzzle bitcoin Optimizing for a feature-rich programming language vs a small attack surfacebitcoin fake nxt cryptocurrency cryptocurrency analytics logo ethereum bitcoin gif 16 bitcoin usb tether bitcoin магазины blockstream bitcoin scrypt bitcoin bitcoin описание ютуб bitcoin panda bitcoin
bitcoin book иконка bitcoin cpuminer monero In September 2011, this method suggested that there were about 60,000 users.bitcoin de solo bitcoin котировки bitcoin For the full node operator, running the daemon and storing the chain, the benefit of dedicating hard drive space to the Bitcoin blockchain is 'minimally trusted' transactions; that is, he or she can send and receive Bitcoin without needing to trust anyone else’s copy of the ledger, which might be contain errors or purposeful falsifications.Wired noted in 2017 that the bubble in initial coin offerings (ICOs) was about to burst. Some investors bought ICOs in hopes of participating in the financial gains similar to those enjoyed by early bitcoin or Ethereum speculators.exchange cryptocurrency top bitcoin bitcoin map ethereum конвертер bitcoin wm ethereum claymore monero address bitcoin nvidia ethereum пул bitcoin step The UK-based Provenance offers supply chain auditing for a range of consumer goods. Making use of the Ethereum blockchain, a Provenance pilot project ensures that fish sold in Sushi restaurants in Japan have been sustainably harvested by its suppliers in Indonesia.cryptocurrency forum 100 bitcoin server bitcoin cryptocurrency charts Cryptocurrencies offer the people of the world another choice.bitcoin cards ethereum пул bitcoin сша bitcoin 3 сервера bitcoin bitcoin background direct bitcoin bitcoin презентация bitcoin суть Check that the timestamp of the block is greater than that of the referenced previous block and less than 15 minutes into the futurede bitcoin cryptonator ethereum конвертер ethereum airbitclub bitcoin token ethereum платформе ethereum abi ethereum bitcoin монеты captcha bitcoin тинькофф bitcoin bitcoin aliexpress bitcoin asic криптовалюта ethereum
bitcoin коллектор vizit bitcoin bitcoin create japan bitcoin
добыча monero 3 bitcoin dash cryptocurrency microsoft bitcoin bitcoin цены удвоить bitcoin koshelek bitcoin bitcoin матрица bitcoin обвал bitcoin maps bitcoin greenaddress форк bitcoin electrum bitcoin usd bitcoin bitcoin компьютер bitcoin daily coindesk bitcoin bitcoin лучшие кошель bitcoin bitcoin сбор bitcoin лопнет bitcoin openssl халява bitcoin генераторы bitcoin locals bitcoin hyip bitcoin ethereum пулы ethereum course bitcoin cz логотип bitcoin poloniex monero
base bitcoin bitcoin hack bitcoin вложения
euro bitcoin coffee bitcoin
bitcoin рухнул ethereum калькулятор mmm bitcoin bitcoin lurkmore
cap bitcoin bitcoin kazanma ethereum contract monero купить bitcoin loan average bitcoin bitcoin создать air bitcoin bitcoin blockchain bitcoin maps bitcoin майнер bitcoin приват24 4 bitcoin agario bitcoin bitcoin investing monero hardware usa bitcoin окупаемость bitcoin r bitcoin
bitcoin calc bitcoin paw tether bitcointalk metatrader bitcoin cryptocurrency market red bitcoin
bitcoin central monero proxy обменять monero bitcoin xt bitcoin betting android tether bitcoin hyip bitcoin loan
bitcoin 99 1 ethereum bitcoin презентация bitcoin avalon bitcoin скрипт the ethereum amazon bitcoin Time lock wallets don't exist yet except for simple javascript pages which rely on Javascript cryptography and are therefore not safe.bitcoin knots bitcoin poloniex bitcoin car bitcoin kaufen ethereum майнеры bitcoin hacker greenaddress bitcoin продам ethereum kran bitcoin