Why does the value of Bitcoin fluctuate?
A fluctuation in the Bitcoin price is perfectly normal, even if the trend generally points upwards. Anyone buying bitcoins today can be 30% richer or poorer tomorrow. The digital currency is notorious for its volatility, and owners, miners, and investors must be able to handle it.
Where does a big fluctuation in the Bitcoin value come from?
Bitcoins are not managed by any bank, they reside on computers from a worldwide Bitcoin community. Anyone can buy and sell them (against conventional money such as the euro) and mine, so they produce on their own computer - if they have the equipment and if it is worth it due to the very high electricity costs for the escalating computing processes.
In the US, there are relatively many private miners, where private individuals pay only 30 to 40 percent, companies only 25 percent of our domestic (private) electricity prices. But you can easily acquire bitcoins in this country by downloading Bitcoin software and storing it as an eWallet - ie a digital purse - on a desktop PC or a mobile device, and then on a Bitcoin exchange the cryptocurrency with a euro credit to buy.
Because of a certain euphoria, more and more people are interested in this. The public know-how for handling Bitcoins and eWallets is growing, confidence is rising, the price of the digital currency is also rising. On the Internet, there are stories of ordinary people (motorists, shop assistants) who bought bitcoins as of 2012 and are millionaires today.
Nevertheless, bankers warn that investing in bitcoins is extremely risky. If you just want to save money or do something for old age, you should keep your hands off it. These warnings, some of which come from proven professionals, such as central bankers (from Germany and other countries), alternate with news of a new high-flying on the Bitcoin course. That such ambivalence in perception leads to a fluctuation in this course is perfectly normal.
Impact of Mining on the Bitcoin Price
Bitcoins can mine private individuals themselves, and then they are rewarded with shares of their work. But the so-called mining is becoming more and more expensive, the computing power for this increases, which significantly increases, among other things, the electricity costs. Also, equipment in the form of hardware and software is required.
That mining has become more laborious is intentional: The number of bitcoins to be exploited is limited to 21 million from the outset, which should give the cryptocurrency stability. The digital currency community is gradually pursuing this goal, with more than 16.42 million bitcoins in circulation by the end of June 2016. So they are becoming scarcer and therefore more valuable: The price moved in mid-July 2017 by $ 2,500 for a single Bitcoin, and while it is currently below $4,000 per Bitcoin, there is a strong belief that it will rise again and will be back up to its high point in the near future..
Bitcoins, which until now have been stolen by hacker attacks but cannot be faked, are now considered digital gold. In real money, a Bitcoin is currently significantly more valuable (more than twice as expensive) as a troy ounce of gold. This is what the analyst Horace Dediu points out. Nevertheless, they remain a speculative investment. Its value is controlled by the three factors supply, demand, and mining (as in gold), but it is not regulated by central banks (as with other currencies).
Also on corporate values such as shares, bitcoins are not coupled. These are all reasons why the Bitcoins price can fluctuate so extremely, as the specialist Rüdiger Stumpf claims, who is following the development for the magazine "Finanztest".
Bitcoins as a means of payment
Another influence on the performance of Bitcoins is their use as a means of payment. In Japan, since April 2017, they have been among the officially used and thus also subject to legal regulations, which has significantly increased their worldwide acceptance. Not only in the Far East, but also in other places around the world, they have been accepted in pizzerias and cafes, software shops, holiday home offices, and record shops for quite some time, and they are now coming to the attention of the general public. The bosses of such companies often appreciate that the banks are left out in a Bitcoin transfer, which is similar to cash.
There are therefore no transfer fees as for transfers or credit card payments. Bitcoin transfers between Bitcoin accounts are basically free, so with higher acceptance, virtual money could well rise to the global currency. Especially traders who cooperate with foreign suppliers outside the euro area, value such transfers very much, because conventional foreign currency transactions still generate significant fees, and they take a long time.
All this is missing with Bitcoin. However, traders are of course affected by the price fluctuations in Bitcoin and must therefore accurately calculate before each transaction. This could in some cases reduce acceptance again. The young currency therefore still has a clear up and down in front of it, its fluctuations will not diminish so quickly.