Explained: Why Do Cryptocurrency Prices Fluctuate So Frequently?
Cryptocurrencies are these days a regular topic of discussion. Especially seeing the boom in its market has raised many eyebrows with no Government regulation over it. It may be possible the Indian Government exercises little control over the fluctuating prices of cryptocurrencies by the end of this year.
Know the factors that influence the prices of the cryptocurrencies below and the reason for such steep rises and falls in their prices below.
What is the reason for the Government to Exercise Control on Cryptocurrencies?
People in India invested generously in Bitcoind till January 2021 and the price boom gave them great returns as well. Bitcoin reached its highest in October 2021, but since then the fall has been the steepest in the prices. Why is it so? The government needed to rise to the occasion and generate some checks on the market of cryptocurrencies to help the people and investors out.
Why are Cryptocurrency Prices So Volatile?
The simple reason is that this market is still in its infant stage. The cryptocurrency market is still in a nascent stage to follow the static curve. People think of investing and divesting in this market every day. This is generally the trend with any such new market. Investors try to make more money and easy money by investing in a new market and also get to check if they can influence the market or not by quickly investing and divesting.
How is Cryptocurrency Useful?
It all depends on how many people use bitcoins, or any other cryptocurrency. Many people instead of holding it, spend the coin which impacts its price. There is a parallel economy running in the countries that are unmonitored due to the circulation of cryptocurrencies.
These currencies are useful in various ways like visiting a restaurant and paying bills using cryptos wherever acceptable. It has also avoided cash transactions at many places. This utility has increased its prices.
Coins in Circulation:
As of now, it is estimated that 21 million bitcoins could be generated in the world. As the investors would increase, the number of coins would decrease and the prices would increase. There is also a burning mechanism to burn the supply of these coins. There are also whale accounts that hold a large share of the total circulation of a coin in the market. If some whale accounts simultaneously begin as per a strategy, they begin to influence the market and the prices are affected in this way.