Digital currency revolutionizes how online payments are made by providing the mechanism to make purchases and fulfill monetary transactions. In addition, the decentralized digital currency promises to make things easier for people, including better security, low transaction fees, and decentralized authority.
To learn the impact of Bitcoin trading and how it is starting to shift the monetary market, you need to dig down its history. The peer-to-peer cashless system was first introduced in 2009 on ideas born from a white paper proposal. It was the starting place of Bitcoin trading and the pioneering of cryptocurrencies.
Understanding Bitcoin Trading and the Nature of Cryptocurrency Investment
Bitcoin has become one of the most successful cryptocurrencies because it has become synonymous with central bank-controlled fiat currency. Although traditional money is widely used in retail transactions, Bitcoin has become valuable leverage to build a digital asset portfolio.
Bitcoin works similar to precious metals in the current trading system with limited quantity and only a few uses. The digital currency works through blockchain technology where the monetary value of the crypto resides, and its use is limited to the ecosystem’s financial service.
However, a gradual adaptation of Bitcoin and various cryptocurrencies would start to creep into people’s lives to find their way to retail transactions. For now, Bitcoin trading is the only viable means of making your investment grow.
Bitcoin Supply is a Predominant Factor to Its Market Volatility
One factor that drives the market volatility of Bitcoin is its capped supply. The expected mined total of Bitcoin is 21 million, and it has a lifespan that will end in 2140. Therefore, the fixed supply means a rapid increase or decrease of market prices depending on demands.
According to the Bitcoin Volatility Index, market prices are so sporadic that a single trading day in May 2021 saw the plunge of Bitcoin by about 30%, recovered, and went down to about 12%. Several drivers to its volatility include stakeholder movements, security vulnerabilities, and high-profile losses contributing to its market performance.
Nonetheless, the very reason why the digital currency is volatile is that it is still at a nascent phase compared to various investment currencies. Thus, cryptocurrency is still in its experimental stage, to say the least: influencing prices and affecting its performance.
Rules and Regulations Affect Bitcoin Prices
The rapid popularity of cryptocurrencies, including Bitcoin, prompts governments and regulators to define and redefine digital assets and form legislations. For example, the Australian government is starting to form rules and regulations about crypto-asset trading, regularising transactions and shareholder dealings.
With the implementation of new regulations surrounding cryptocurrency trading, one point to consider is that the more stringent and repressive it gets, the more prices will drop. And this is because demands will be lesser.
However, if laws become favorable to the crypto industry, investors can expect a catalytic effect on its growth. And since Bitcoin uses a decentralized technology, it is not linked to any central government. Therefore, the imposition of government laws and regulations can directly affect market prices since it will cover investor actions.
Now is the right time to invest in Bitcoin trading because of its store value which is a good hedge over inflation concerns. In addition, with price increases, Bitcoin increases in value, which means greater yields to an investor.
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