Why Has Bitcoin's Price Changed Over the Years?

Although the potential of bitcoin as a financial tool is largely accepted today, it had begun at quite a rough note. Even today, while many financial experts and investors see enormous potential in these financial tools, many are still sceptical of this digital currency. Initially, bitcoin was associated with a dubious reputation because of its involvement in nefarious activities.

However, with the security of trustworthy applications just go to platform which make bitcoin trading seamless and secure, such apprehensions have largely been allayed. However, one of the angst that does remain even to this day is the high volatility of the value of bitcoins.

The first price jump in the history of bitcoin took place in 2010, during which the value of a single bitcoin increased from $0.0008 to $0.08. Ever since then, cryptocurrencies have undergone numerous rises and falls in their prices. The trading history of cryptocurrencies has always been very volatile. This digital currency has now gained traction as a store of value and a highly volatile but promising field of investment. With several serious crises plaguing its reputation, it was initially difficult for bitcoin to establish itself.

Many investors have put forward the popular theory of changing speculator interest as the possible reason behind the volatility of the price of bitcoin. According to this perspective, prices of bitcoins increase when, because of several factors, speculators show an increased interest in purchasing bitcoins. A decline in these prices, likewise, is understood as a factor of decreasing interest on the part of the speculators. While this perspective could have held some credibility during the initial days, the equations are not as simple today.

Various governments have now begun mining and using cryptocurrencies of their own. Many countries have decided to legalise trading in bitcoins, with many agencies devising ways of controlling and regulating their transactions. As such, a host of factors come into play while considering the price volatility of bitcoin today. Some of them are:

1. During the initial days of bitcoin, its price volatility depended largely upon its traction with mainstream retailers, both online and offline. Prices would often increase when retailers like Overstock declared that they would accept bitcoins.

2. The state of affairs had an immense impact on the price of bitcoins. For instance, whenever a country would announce a ban on cryptocurrencies, their prices would drastically fall and influence the price trajectory. On the other hand, whenever bitcoin traders and investors would book major profits, the prices would suddenly go up once again.

3. During the present scenario, factors like developments in the bitcoin industry have become much more important in price determination than other factors. This industry is one full of potential and is therefore subject to frequent change and technological development.

4. An increase in the number of large institutional investors has been another driving force in the price volatility of bitcoins. The interests coming in from large institutional investors have been rapidly changing the uncertainty that is generally associated with their industry. Moving away from retail investors, bitcoin is now witnessing an increased exhibition of interest by large investment agencies. This can be seen as a desirable occurrence as it would reduce the volatility and induce stability into the bitcoins industry.

5. Global economic stability is another major indicator of price changes in bitcoin. This cryptocurrency had always positioned itself as a supranational entity that is not restrained by the limits of the national economies. Therefore, local economic instability leads to an increase in the economic activities on blockchains. Whenever a government-backed fiat currency falters and is faced with challenges, increases in bitcoin activities become observable.

Conclusion

Therefore, different factors influence the price volatility of bitcoins in a given span of time. The wide range of influences that act on the number of bitcoin transactions in a given span includes the interest of the investors, the state of affairs, the traction it has gained, the nature of its investors, the stability of the existing economic order, and the technological developments expected.