Ups & Downs
It seems like Bitcoin prices fluctuate on a regular basis. Why is this the case? In July, the prices were really good, but now, they’ve gone down again.
There are quite a few reasons why this is the case. Bitcoin is much like any other risk based asset, in the sense that it fluctuates.
Let’s talk about why Bitcoin fluctuates, and what it means for the value of each piece of the currency.
Strong July, Weaker August
Bitcoin started August trading at a value of $23,289. This is down from July, when it posted a gain of 22%.
If you know anything about Bitcoin, then you will know that it moves quite quickly. Within the space of a day, it went back into the green for August.
A recent analysis by Simon Peters, the market analyst for eToro, says that “while still a way to go to recover losses of H1, crypto assets such as Bitcoin are witnessing a mini revival.”
What Influences the Price of Crypto?
The price of cryptocurrency can be influenced by many things. Obviously, growth can vary from one month to the next. It’s important to recognize that there are a lot of high-risk assets that enjoy strong months and weaker ones.
As Peters himself says, “We’re very much seeing that the syncing up with equity markets is continuing. July saw stocks, particularly tech and other higher-risk-profile equities surge back. Much of the effects of inflation and rate hikes now appears priced in, with markets sanguine about recession worries.”
Seemingly, it is all about the random rise and fall. However, there is something else going on.
Institutional Investments
Institutional investments in the market look to be affecting the correlation between the moving of Bitcoin prices and other types of risk assets.
Once again, we go back to Peters for this, as he says that:
“Institutions have treated crypto holdings in much the same way as these equities, which is why there’s greater correlation now than in the past. As those big institutions move back into the space the crypto investors could see valuations tick back to better levels.”
The current best guess for reasons why the price of Bitcoin has fluctuated so wildly at the moment is futures on the NASDAQ have turned negative
Final Thoughts
At the end of the day, we all need to understand that Bitcoin is just like any other cryptocurrency. It’s a volatile asset, which means that people need to be careful when trading with it.
Volatile assets can fluctuate wildly in terms of value, which makes them difficult to properly use lies. However, if you do put the time into understanding them, you’ll find that they can be highly effective.
Ultimately, the value of these assets will rise and fall naturally over time, and while August may not be the best for the value, things may pick up in September. Anything approaching the strong rise in value that we saw in July would be a good thing.
