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.
сложность ethereum
rpg bitcoin
bitcoin проект карты bitcoin bitcoin china gek monero bitfenix bitcoin bitcoin video краны bitcoin bitcoin location all cryptocurrency
получить bitcoin bitcoin шахта Blockchain Interview GuideBlockchain is a decentralized peer-to-peer networkmonero hardware
создатель bitcoin
community bitcoin bitcoin office mine ethereum bitcoin home bitcoin компания cryptonight monero ethereum транзакции
bitcoin приложение billionaire bitcoin tp tether ethereum coingecko bitcointalk bitcoin дешевеет bitcoin bitcoin books бизнес bitcoin bitcoin protocol
bitcoin переводчик bitcoin mmgp usb tether rx470 monero debian bitcoin портал bitcoin ethereum платформа bitcoin habr logo bitcoin bitcoin grafik ethereum обменять
компания bitcoin Touchscreen user interfacebitcoin халява bitcoin адрес ethereum токен bitcoin транзакции bitcoin update bitcoin valet ethereum charts
бесплатный bitcoin bitcoin пожертвование ethereum homestead bitcoin ann сложность ethereum cryptocurrency wallet bitcoin faucet
genesis bitcoin bitcoin magazin bitcoin python korbit bitcoin machine bitcoin time bitcoin tether wifi reddit bitcoin amd bitcoin bitcoin trust bitcoin fpga bitcoin
reverse tether stellar cryptocurrency пожертвование bitcoin bitcoin что bitcoin eu ethereum заработок bitcoin зебра пул monero bitcoin investing ubuntu bitcoin
bitcoin заработать chart bitcoin ethereum course форк ethereum бот bitcoin bitcoin приложения bitcoin bcc программа ethereum bitcoin x2 topfan bitcoin iso bitcoin
Spotify, for its part, has produced two in-depth videos about how its independent project teams collaborate. These videos are instructive as to how open allocation groups can come together to build a single platform and product out of many component teams, without any central coordinator.game bitcoin reddit bitcoin
bitcoin bcn bitcoin зарегистрировать
apple bitcoin bitcoin genesis byzantium ethereum ethereum видеокарты
bitcoin freebie ethereum майнеры
bitcoin талк сети bitcoin
accepts bitcoin клиент ethereum x bitcoin bitcoin официальный global bitcoin
bitcoin etherium bitcoin обзор difficulty ethereum hourly bitcoin
bitcoin direct куплю ethereum bitcoin основы
maining bitcoin bitcoin sha256 faucets bitcoin bitcoin talk bistler bitcoin cryptocurrency jax bitcoin bitcoin like bitcoin кэш bitcoin форки accepts bitcoin конференция bitcoin cryptocurrency bitcoin bitcoin экспресс bitcoin банкнота cpa bitcoin bitcoin seed bitcoin вложения tether android bitcoin пицца ethereum farm q bitcoin дешевеет bitcoin connect bitcoin bitcoin прогнозы bitcoin 4000
ethereum логотип ethereum cgminer bitcoin комиссия кошельки bitcoin
bitcoin store
ethereum настройка bitcoin заработка bitcoin 2x
hosting bitcoin скачать bitcoin bitcoin автоматически магазин bitcoin опционы bitcoin monero usd monero fork bitcoin обменники ethereum pools пул monero bitcoin динамика bitcoin cc bitcoin io ethereum заработок logo bitcoin доходность bitcoin gadget bitcoin future bitcoin hack bitcoin arbitrage bitcoin xbt bitcoin обменник ethereum ethereum crane kinolix bitcoin roboforex bitcoin bitcoin flapper bitcoin hub linux bitcoin bitcoin компьютер 999 bitcoin сигналы bitcoin новые bitcoin
добыча bitcoin simplewallet monero miner monero bitcoin database брокеры bitcoin
cryptocurrency charts bitcoin plus ethereum описание rinkeby ethereum
monero курс multiply bitcoin monero криптовалюта зарабатывать bitcoin
bitcoin gadget ставки bitcoin курс bitcoin магазин bitcoin ethereum android bitcoin official
пример bitcoin tether обменник monero краны bitcoin луна location bitcoin Data for the life of the aircraftNot debt-basedbitcoin регистрации secp256k1 ethereum tether js avto bitcoin отследить bitcoin block bitcoin токен ethereum cryptocurrency wallet bitcoin motherboard bitcoin ферма bitcoin addnode bitcoin 999 half bitcoin credit bitcoin ethereum alliance карты bitcoin bitcoin зарабатывать bitcoin покупка android tether bitcoin приват24 bitcoin box is bitcoin ethereum poloniex forbot bitcoin bitcoin alpari accepts bitcoin bitcoin double ethereum rub bitcoin account криптовалюта ethereum wei ethereum bitcoin quotes сбор bitcoin pool bitcoin
tether wifi bitcoin 123 0 bitcoin trading bitcoin bitcoin start bitrix bitcoin cryptocurrency ico ethereum crane
bitcoin биржа by Paul Gilbitcoin mt4 bitcoin scripting
monero pro
bitcoin spin ann bitcoin сети bitcoin airbitclub bitcoin tether майнинг currency bitcoin bag bitcoin bitcoin 2020 bitcoin окупаемость биржа bitcoin bitcoin valet bitcoin hacker bitcoin monkey сервисы bitcoin fx bitcoin переводчик bitcoin british bitcoin However, Glassnode has plenty of research and data regarding how long people hold their Bitcoin.bitcoin cz analysis bitcoin
bitcoin school
сбербанк bitcoin
bitcoin s форк bitcoin отзыв bitcoin bitcoin 50 bitcoin forums testnet bitcoin заработок ethereum bitcoin config
bitcoin 5
bitcoin poloniex bitcoin phoenix bitcoin ads шахты bitcoin tether provisioning bitcoin xyz рынок bitcoin скрипты bitcoin reward bitcoin фермы bitcoin
ethereum coins ферма ethereum bitcoin donate bitcoin 9000 bitcoin reserve обвал ethereum bitcoin капитализация bitcoin advcash account bitcoin king bitcoin bitcoin grafik
daily bitcoin
bitcoin кран bitcoin valet ethereum shares tether майнинг
бесплатные bitcoin bitcoin mail bitcoin hyip make bitcoin security bitcoin bitcoin обналичить краны monero
bitcoin avalon системе bitcoin bitcoin miner market bitcoin 1024 bitcoin dwarfpool monero faucet cryptocurrency x bitcoin bitcoin сервисы torrent bitcoin bitcoin продажа claim bitcoin Proposedmixer bitcoin mining cryptocurrency rate bitcoin bitcoin motherboard bitcoin страна bitcoin investing
bitcoin получить bitcoin nonce collector bitcoin заработок bitcoin monero algorithm bitcoin favicon bitcoin 3 microsoft ethereum monero client bye bitcoin bitcoin check работа bitcoin bitcoin алгоритм playstation bitcoin hack bitcoin контракты ethereum bitcoin генератор elena bitcoin bazar bitcoin But most important, cryptocurrencies use blockchain, which is a set of records that are placed into a container known as a block. These transactions are kept public and in chronological order.bitcoin mac bitcoin tm bitcoin rig bitcoin мавроди alien bitcoin 600 bitcoin bitcoin майнеры bitcoin store bitcoin ethereum bitcoin markets 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.faucet bitcoin капитализация ethereum удвоитель bitcoin
bitcoin capital bitcoin landing bitcoin переводчик Notable cryptrocurrency exchange hacks, resulting in the theft of cryptocurrencies include:платформу ethereum конвектор bitcoin tor bitcoin monero rur bitcoin gold продать ethereum
bitcoin информация tor bitcoin bitcoin simple ethereum complexity network bitcoin wordpress bitcoin bitcoin ethereum monero free bitcoin slots cudaminer bitcoin difficulty monero перспективы ethereum flex bitcoin
surf bitcoin abc bitcoin bitcoin selling bitcoin миксер online bitcoin cryptocurrency analytics bitcoin stealer дешевеет bitcoin стратегия bitcoin ethereum coin bitcoin help laundering bitcoin оборудование bitcoin bitcoin клиент bitcoin проверить bitcoin com bitcoin register bitcoin escrow bitcoin телефон solidity ethereum кран ethereum работа bitcoin invest bitcoin bitcoin blocks tether верификация ethereum core bitcoin торговля заработай bitcoin bitcoin masternode bitcoin markets bitcoin satoshi kran bitcoin bitcoin рост accepts bitcoin tp tether github ethereum
foto bitcoin top cryptocurrency bitcoin best bitcoin main bitcoin смесители шифрование bitcoin nodes bitcoin bitcoin blockstream bio bitcoin registration bitcoin bitcoin film rx580 monero bitcoin land lite bitcoin bitcoin автосерфинг space bitcoin strategy bitcoin bitcoin основатель эпоха ethereum ethereum farm bitcoin ads bitcoin аккаунт эмиссия bitcoin cryptocurrency magazine bitcoin перевод bitcoin auto 9000 bitcoin android tether
bitcoin rub bitcoin mining
ethereum пул ethereum логотип decred ethereum bitcoin видеокарты bitcoin иконка free bitcoin etoro bitcoin
tor bitcoin cranes bitcoin bitcoin journal payeer bitcoin cryptocurrency logo blue bitcoin create bitcoin
Note that Alice's control over her bit gold does not depend on her sole possession of the bits, but rather on her lead position in the unforgeable chain of title (chain of digital signatures) in the title registry.wikipedia ethereum monero minergate yandex bitcoin bitcoin зарегистрировать ethereum валюта динамика ethereum monero криптовалюта source bitcoin rigname ethereum книга bitcoin дешевеет bitcoin
bitcoin golden accepts bitcoin bank bitcoin
wechat bitcoin bitcoin зебра
bitcoin роботы etherium bitcoin ethereum контракты Basics of Bitcoin Walletswallet tether bitcoin half chvrches tether bear bitcoin
total cryptocurrency bitcoin калькулятор ethereum cpu bitcoin 1000 utxo bitcoin bitcoin airbitclub майнинг bitcoin bitcoin удвоить bestexchange bitcoin ethereum монета miner monero wirex bitcoin The hardest mental hurdle to overcome, when evaluating bitcoin as money, is often that it is digital. Bitcoin is not tangible, and on the surface, it is not intuitive. How could something entirely digital be money? While the dollar is mostly digital, it remains far more tangible than bitcoin in the mind of most. While the digital dollar emerged from its paper predecessor and physical dollars remain in circulation, bitcoin is natively digital. With the dollar, there is a physical representation that anchors our mental models in the tangible world; with bitcoin, there is not. While bitcoin possesses far more credible monetary properties than the dollar, the dollar has always been money (for most of us), and as a consequence, its digital representation is seemingly a more intuitive extension from the physical to the digital world. While the dollar’s basis as money is anchored in time and while its digital nature may seem more tangible, bitcoin represents finite scarcity. The supply of the dollar on the other hand has no limits.bitcoin kraken ethereum краны bitcoin платформа abc bitcoin иконка bitcoin bitcoin darkcoin bitcoin win bitcoin keywords bitcoin nedir bitcoin flip nodes bitcoin doubler bitcoin ethereum видеокарты frontier ethereum
bitcoin puzzle We now consider how long the recipient of a new transaction needs to wait before beingbitcoin email bitcoin ios
bestchange bitcoin bitcointalk monero
lootool bitcoin moneypolo bitcoin bip bitcoin
bitcoin msigna mercado bitcoin прогнозы ethereum
ios bitcoin bitcoin fan bitcoin пицца super bitcoin вывод monero
bitcoin скачать
сайты bitcoin bitcoin greenaddress bitcoin markets карта bitcoin solo bitcoin credit bitcoin de bitcoin bitcoin кредит utxo bitcoin clockworkmod tether bitcoin bonus шахта bitcoin trade cryptocurrency
блоки bitcoin отследить bitcoin bitcoin проверить bitcoin betting bitcoin ixbt bitcoin аналоги ethereum news bitcoin check bitcoin plugin bitcoin cli nubits cryptocurrency ethereum метрополис bistler bitcoin monero майнинг roboforex bitcoin
cryptocurrency это bitcoin news 16 bitcoin bitcoin вектор bitcoin оборот live bitcoin алгоритм bitcoin
зарегистрировать bitcoin bitcoin openssl bitcoin official кран bitcoin bitcoin mmgp bitcoin основы faucets bitcoin ethereum frontier россия bitcoin карты bitcoin разработчик bitcoin bitcoin talk 2016 bitcoin difficulty bitcoin цена ethereum planet bitcoin monero dwarfpool bitcoin loan The blockchain is an undeniably ingenious invention – the brainchild of a person or group of people known by the pseudonym, Satoshi Nakamoto. But since then, it has evolved into something greater, and the main question every single person is asking is: What is Blockchain?minergate monero secp256k1 bitcoin bitcoin local
лотереи bitcoin foto bitcoin инструкция bitcoin wei ethereum bitcoin easy биржа ethereum cpuminer monero ethereum прогноз обновление ethereum bitcoin pools bitcoin оборот ethereum markets daily bitcoin bitcoin сети bitcoin antminer java bitcoin bitcoin кошелька bitcoin вывести multiply bitcoin сайты bitcoin bitcoin бумажник bitcoin jp bitcoin монеты bitcoin пример
us bitcoin monero benchmark gadget bitcoin bitcoin видеокарта bitcoin tradingview adbc bitcoin credit bitcoin bitcoin форк bitcoin регистрации принимаем bitcoin
перспектива bitcoin
xbt bitcoin bitcoin venezuela bitcoin монет monero faucet капитализация bitcoin
bitcoin исходники
цена bitcoin bitcoin программа ферма ethereum lootool bitcoin 2 bitcoin ethereum mist faucet ethereum ico bitcoin korbit bitcoin обналичить bitcoin java bitcoin bitcoin рейтинг casino bitcoin bitcoin xl security bitcoin ethereum casper bitcoin invest яндекс bitcoin Before you decide to try it for yourself and while you’re still asking, 'Should I invest in Ethereum or some other cryptocurrency?' instead of telling us that you will, let’s take a look and see if it is something you may want to do.monero simplewallet криптовалюту monero abc bitcoin 2016 bitcoin 999 bitcoin
my ethereum boom bitcoin
How exactly the mixHash and nonce are calculated using the PoW function is somewhat complex, and something we can delve deeper into in a separate post. But at a high level, it works like this:bitcoin xt bitcoin avalon
bitcoin maining
ebay bitcoin bitcoin payment bitcoin 99 обмен monero collector bitcoin форумы bitcoin bitcoin деньги bitcoin стратегия
bitcoin de bank cryptocurrency bitcoin сети bitcoin клиент pplns monero genesis bitcoin bitcoin masters bitcoin lion вывод bitcoin ethereum forum краны monero форумы bitcoin bitcoin wm bitcoin cudaminer block bitcoin bitcoin зарегистрироваться принимаем bitcoin
escrow bitcoin amazon bitcoin bitcoin dance bitcoin орг bitcoin транзакция
erc20 ethereum sportsbook bitcoin bitcoin get bitcoin bounty валюты bitcoin прогнозы bitcoin hashrate bitcoin bitcoin пирамиды bitcoin symbol electrum bitcoin
обменник monero bitcoin ethereum
gadget bitcoin динамика ethereum
sberbank bitcoin bitcoin get blog bitcoin stake bitcoin ethereum асик форекс bitcoin bitcoin fund bitcoin принимаем
bitcoin blockchain vector bitcoin ethereum хардфорк asics bitcoin bitcoin адреса space bitcoin картинки bitcoin bitcoin завести ethereum online ethereum gas check bitcoin bitcoin проект segwit bitcoin surf bitcoin
finex bitcoin падение ethereum safe bitcoin инструкция bitcoin
bitcoin талк
love bitcoin cryptocurrency dash bitcoin торговать bitcoin список bitcoin magazine проекта ethereum bitcoin описание bitcoin аккаунт bitcoin legal bitcoin япония
займ bitcoin bitcoin окупаемость bitcoin rotator bitcoin xpub
ethereum claymore Through the use of cryptographic proof and decentralized networks Bitcoin minimizes and replaces these trust costs. With the available technology, there are fundamental trade-offs between scale and decentralization. If the system is too costly people will be forced to trust third parties rather than independently enforcing the system’s rules. If the Bitcoin blockchain’s resource usage, relative to the available technology, is too great, Bitcoin loses its competitive advantages compared to legacy systems because validation will be too costly (pricing out many users), forcing trust back into the system. If capacity is too low and our methods of transacting too inefficient, access to the chain for dispute resolution will be too costly, again pushing trust back into the system.'bitcoin protocol bitcoin инструкция вложения bitcoin Mining is competitive. The first miner to generate a hash that is smaller than a target set by the network 'finds' the new block, receives the block reward – currently 25 litecoin – and any transaction fees present in the block. Since there is no way to know what nonce will generate a below-target hash, miners' results are subject to two factors: luck, which is outside of their control; and computing power, which can be bought (or stolen).робот bitcoin bitcoin fpga bitcoin rt bitcoin course api bitcoin segwit2x bitcoin bitcoin коллектор dice bitcoin ico ethereum cryptocurrency trading bitcoin loan cpa bitcoin bitcoin hyip
bitcoin games registration bitcoin bitcoin p2p accepts bitcoin bitcoin лохотрон trader bitcoin direct bitcoin стоимость bitcoin ethereum telegram продать monero курс tether зебра bitcoin банкомат bitcoin bitcoin token simple bitcoin bitcoin allstars
bitcoin дешевеет bitcoin swiss
bitcoin кошелек forum ethereum конвертер ethereum bitcoin legal
transactions bitcoin ethereum serpent tp tether best bitcoin lealana bitcoin mercado bitcoin