Why is the price of BTC so volatile? The uncertainty about the intrinsic value of Bitcoin and the future value of Bitcoin makes it a highly volatile asset.
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Why is the price of BTC so volatile?
A decreasing amount of new BTC is generated every day due to the limited amount of Bitcoin. To maintain a constant price, demand must match this rate of inflation. The Bitcoin market is very small compared to other industries, and media coverage alone can push its price up or down. For example, news that Tesla is ready to accept BTC will push its value higher or vice versa, making the price of Bitcoin very volatile.
Likewise, a tweet stating that the BTC blockchain is shutting down will cause its value to plummet, followed by Bitcoin trading volume. So, given the high volatility, could the price of Bitcoin ever hit zero? Technically, this is possible.
For example, the price of BTC is not linked to any fiat currency like the US dollar or any other real-world asset; subject to value perturbation. However, we have seen that algorithmic stablecoins like floor treasuries can create market turmoil as well.
However, for such a catastrophic event to occur in the case of BTC, there are many red flags, such as an extended bull market, that will appear beforehand to allow investors to protect their funds. Also, it is not easy to destroy the complex structure of Bitcoin; However, scalability issues could jeopardize its future. But this does not mean that the price of BTC will suddenly drop to zero.
What would happen if BTC price collapsed to zero?
Although it is difficult, but if the price of BTC drops to zero, it will affect traders, institutional investors, the price of other digital currencies, cryptocurrency institutions, and the entire financial system.
Now, assuming the price of BTC drops to zero, this will affect the price of other cryptocurrencies . As a result, many investors can withdraw (entirely or substantially) to reduce losses, depending on the type of their investment.
Large institutional investors may be particularly at risk because more of them have made larger investments to diversify their portfolios. Those most at risk are those who have recently invested at high prices or in crypto derivatives, and will need to liquidate other assets to meet margin calls.
Customers may lose faith in a system that appears to be collapsing, affecting cryptocurrency institutions such as Coinbase, Binance, etc., which depend on customers for transaction flows to generate revenue and funding/investments for growth.
Investments in these companies may stop completely or decrease significantly. In addition, these organizations may not be able to recruit, pay or attract the personnel necessary to operate and expand them.
What are the top tips for investing in cryptocurrency
In the following lines, we will mention what are the most important tips for investing in cryptocurrencies
Make sure that your app can sync with other existing apps
Users will love to use crypto mobile applications with an order book to maintain their trading activities.
This feature encourages them to use one powerful application that connects their trade to a network of existing businesses, thus enhancing liquidity. With a more extensive network of exchanges, liquidity issues will decrease. Get a modern API that shares liquidity and trade volume between two trading apps.
Collaborate with a payment processor
Each payment processor will have unique features that will remain as their identity. To maintain a competitive advantage over other trading applications, you must partner with providers of low transaction rates.
Also, some payment processors include hidden fees in their contracts. Ask your legal advisor to check the documents carefully before you click on the deal. Ensure that processors are compliant with cybersecurity practices. Verify that your payment processor is PCI compliant to rule out the possibilities of cyber threats.
