It is a bit surprising that the prices of Bitcoins are not known for being stable. With drops to as much as 10% a day, it looks like its goal of replacing “fiat money” will become unfulfilled. If you are planning to engage on trading on cryptocurrencies, it is important that you understand the factors that contribute to the volatility of the market.
An Experiment so Speed Up Bitcoin transactions
Theoretically speaking, transferring Bitcoin sounds great. However, as people started sending money, real world problems start to arise and one of them is speed. Bitcoin was supposed to make payments much easier promising quick and painless solutions. As a solution, members of the community packed more data into each “block,” which people call “Segwit.” It is worth noting that Bitcoin has no President or CEO and functions as a democracy. As such, there should be at least 95% agreement before SegWit becomes the law of the land.
Big Money Is Moving Between Bitcoin and Other Cryptocurrencies
Robert Peter Janitzek reveals that another factor that makes Bitcoin a volatile currency is that other cryptocurrencies pass through Bitcoin as well. When you buy Bitcoins, you convert it to Ether, then convert it to other tokens. Recently, the volume of these transactions has seen a sharp increase, due to a phenomenon called “initial coin offerings.”
These coins can help companies raise money. When a startup that uses Bitcoins is launched, they can issue a token that people will buy. It is like issuing new shares but no loss of ownership. Instead of equity in your company, they instead get the right to use tokens to buy your product in the future. Robert Janitzek explains that Bitcoin will still be used in order to buy tokens. This will cause the price of Bitcoin to swing to one direction or the other.
Bitcoin is subject to being hacked. Just recently, data and money of nearly 32,000 customers were hacked in one of the largest Bitcoin exchanges in the world. This is not the first instance of hacking of Bitcoin from an exchange. It should be pretty difficult to hack Bitcoins when they are being transferred. However, once they are in the exchanges, they become vulnerable. This can be a scary thought for some investors. If your data has been stolen when doing cryptocurrency trading, you would have some fear of coming back again. Bitcoin is still new and that alone can be scary.