Bitcoin has been around in various forms for years, but recently, it’s picked up steam in terms of being used as a currency and branded a commodity. It is set to affect those companies in Venezuela by creating a more stable economic environment. Bitcoin’s volatile nature can be attributed to this increased usage. Websites help a novice trader to learn everything about bitcoin trading. The volatility will continue with more people adopting bitcoin. At the same time, oil prices remain low because they are expected to go down further after OPEC members agreed to curb production cuts earlier this month. In addition, you might consider knowing about the Blockchain and the Banking Industry.
Some companies offer to accept bitcoin for a fee, which is paid in local currency. However, companies that do so usually prefer payment by wire transfer. Nevertheless, some small-scale and brick-and-mortar businesses may want to accept bitcoin as payment.
Although it may be possible to accept bitcoin as payment, it is not always the best choice of payment method due to its volatility. In addition, many governments will not accept it as an official currency because they don’t regulate it and don’t have a set or regulated monetary supply. Let’s discuss some potential reasons behind the volatile nature of bitcoin.
Why is bitcoin so volatile?
Let’s take a look at the reasons why bitcoin is so volatile.
- The supply of bitcoins is limited. The Bitcoin currency originally had a fixed supply and, until the creation of Bitcoin Cash, essentially only one kind of bitcoin existed: Bitcoin (BTC). However, there are now two types of bitcoin, usually referred to as Bitcoin (BTC) and Bitcoin Cash (BCH).
- There have been numerous forks to create more bitcoins in circulation. When someone decides to create an alternative version of bitcoin, they change the rules so that it can only be mined with new software builds while the original software can continue to be mined with the original rules. This fork is called a ‘fork’.
- The supply of bitcoin has a limited reward period making it less valuable as other currencies are worth more than bitcoin due to their long-term potential value as opposed to their short-term volatility.
Bitcoin Investor Actions:
As a bitcoin holder, the value of your investment can be affected by the inherent volatility of bitcoin. So, how could you manage this? Instead of focusing on daily price fluctuations, it may be more helpful to focus on the long-term trend of bitcoin’s value, which is estimated to keep growing over time. Unfortunately, it is rather difficult to do given that short-term price fluctuations are too wide-ranging and frequent for such estimations to be made correctly.
Bitcoin in the News:
Venezuelans have been turned toward bitcoin by the country’s economic crisis. The country is expected to ignore the International Monetary Fund (IMF) bailout package, which will save it from default, and instead rely on cryptocurrency reserves to ease its debt crisis. However, this has not happened as it relies heavily on oil revenue, and rich OPEC countries like Saudi Arabia and Venezuela cut back on their production to prop up prices. As a result, it caused a crash in oil prices, and many Venezuelan economists predict this is only the beginning of Venezuela’s problems as we advance.
Many governments and central banks don’t regulate bitcoin, which makes it hard to control. It is dangerous for the economy because some governments fear that bitcoin could replace their legal tender currency. They feel threatened by being unable to control their monetary supply, so they fear that people would turn away from their government-printed money toward bitcoin.
Currently, there are two types of bitcoin currencies: Bitcoin (BTC) and Bitcoin Cash (BCH). Each one is trying to solve a different problem, but it doesn’t appear that there is any consensus on which issue is most important.
Bitcoin Is Still in Its Infancy:
Bitcoin has been around since 2009, but it is still considered to be relatively nascent. As a result, it has a minimal user base and less traction in merchant adoption. In addition, many people are wary because it is an entirely new currency and a risk for those who invest in it.
Bitcoin’s current market value as a currency is only about 1/20th that of the Venezuelan Bolivar (VEF) at about USD 30,000. This number continues to fluctuate daily because of the frequent and massive price swings, which make bitcoin an extremely volatile investment. It makes it difficult for the average person to invest without taking on substantial risk if they want to get involved.