For any trader, it is very important to understand the risks involved due to the volatility of Bitcoin. The price of this currency can see extreme ups, and lows that can severely impact the returns you wish to achieve from it. Before investing in this currency, it becomes very important to understand who actually sets its price.
In this article, we will look at this aspect in detail.
Price and Liquidity
We all know that Bitcoins are fluctuating in nature, and that is what makes them an insecure investment. One of the reasons for it is liquidity. It is the amount of bitcoin that flows via the market at any given point of time. BitCoin dealers are one of the best places to buy BitCoin Australia.
This convenient trading platform is designed with heightened security, and innovative technology that assures safe, and instant execution of the Bitcoin transactions. For people who frequently trade in a lot of a specific asset all the time, it becomes difficult for them to alter that price in a particular direction.
Using fiat currencies like USD, and Pounds (the simplest and commonly used ways to invest in Bitcoins) people trade massive volumes on a daily basis. In the case of bitcoin, the volume traded in the market is relatively small, such that a single event has the potential to make a big difference.
Important Events That Alters The Price of Bitcoin
Failing of the government
Failure of the government and its inability to regulate bitcoin, like with China, can be one of the reasons for the decline in price.
Silk Road a drug trading route that used bitcoin in the form of the currency shut down, it led to its price reduction.
Uneven distribution of Bitcoin ownership
There are several factors that affect the price of bitcoin. Several bitcoins are generated at a predictable rate. Its ownership is unevenly distributed. This implies that a few bitcoin giants hoard vast stuff that in combination with the deficiency of liquidity makes it convenient for people to change the market.
Bitcoin sale at exorbitant prices
In a few cases, large traders of Bitcoin have been seen to sell Bitcoins in large volumes. This is also one of the reasons to reduce the Bitcoin price. In the past, there has been noted an incidence when a high-volume Bitcoin trader named “BearWhale” caused a sudden crash in the market for some time.
The fluctuation in bitcoin price depends on who you consider for bitcoin investment. The right bitcoin trading strategy is very important. Look at your investment objectives, financial circumstances, risk tolerance, past performance are some of the considerations needed to prevent the loss of your capital.
If you wish to trade in bitcoin, then it is required that you select a specific exchange that has its average price. In addition to it, get knowledge of the above factors to protect your investments from its volatile nature to a good extent.