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Bitcoin price: Why is bitcoin so volatile? Token plunge explained | City & Business | Finance

investors were hit hard on Friday with the popular crypto token plunging over 25 percent since yesterday and over 40 per cent on last weekend.

The token hit a low of £8,099.66 ($10,834.94) around 2.20pm GMT, which was its lowest price since December 10 when the token fell to £10,055.29 ($13,450.99) according to CoinDesk.

To put the fall into perspective, Friday’s low has nearly reached bitcoin’s opening price of £7,102.04 ($9,500.42) at the start of December. 

Bitcoin futures were dealt a similar hit this morning with prices plunging 20 percent down to to £9,168.70 ($12,265) on CME and down 23 percent to £8,783.71 ($11,750) on CBOE.

Why is bitcoin so volatile on the exchanges?

The value of bitcoin is tied to the inherent laws of supply and demand, according to crypto exchange Coinbase.

Whenever traders rally to purchase tokens, the price is bound to go up. The opposite is true when traders decide to sell off their tokens.

Many of the price swings that appear to occur on a daily basis can also be accounted for by the relatively small number of bitcoin in circulation.

Kerim Derhalli, CEO and founder of Invstr, said that even small changes to the supply can have a potentially big impact on prices.

He said: “It’s not clear yet what happened here, but it is possible that someone with a large stockpile of Bitcoin made it available to the market. 

“This increase in availability could have initially driven prices down, with other holders – especially those that bought at the top of the market – panicked into offloading as a result.

“Market corrections are part and parcel of any quickly rising asset class. While this will shake the confidence in some who thought the only way is up for cryptocurrencies, equally, many will have been waiting for a drop in price to make their first foray into crypto markets.”

Nicholas Gregory, CEO of CommerceBlock, also argued that another factor that plays into bitcoin’s volatility is the fact that bitcoin works around the clock.

He told : “It’s always going to be volatile because it is fixed and it is very hard to manipulate it – it’s one of the hardest things.

“I come from a financial background. I used to work for banks on the trading side but I was a software developer where we used trading systems that used to shutdown at 5 o’clock. 

“This is 24/7 and it is a 24/7 trading asset which the world has not seen before.” 

He added that cryptocurrencies on the other hand never go to sleep, and crypto traders never have a weekend off.

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