If you have invested in cryptocurrencies, you are already aware of the
volatile nature of the market. Some days the price of Bitcoin would go up by five percent, and there is a possibility that it can go down by another 10 percent the very next day. With Bitcoin, which is famous globally, showing so much volatility, we can expect the nature of volatility for other smaller cryptocurrencies.
It is essential to follow trading news in the financial sector when you are keen to know more about cryptocurrencies’ developments and price movements and the various types of investment options in the market. You can follow reputed financial websites and publications to get updates on the economic developments across the world.
This article looks at the various aspects of price fluctuation in Bitcoin.
Weakness in First Quarter
The performance of cryptocurrencies, including Bitcoin, wasn’t excellent for the more significant part of this year for various reasons. However, when the first quarter was about to end, we saw some beautiful developments for cryptocurrencies last week. On March 30, the price of Bitcoin hit a high of $47,765, showing the trend of an upward movement. It is very early to call whether the increase in the price of cryptos will survive for an extended period, considering the market’s volatility. It will depend on many factors, including an amicable settlement for the Russia-Ukraine conflict.
Bitcoin crossed the $47,700-mark on March 30 and has the potential to go up in the future. But we must understand that the cryptocurrency was trading in $34,000-$44,000 for most of this year. From looking at the price range, you can quickly identify the scope of volatility in cryptocurrencies. From $34,000, it has the potential to reach $48,000 and vice versa, explaining why a lot of new investors are putting their money in the crypto market.
When you analyze further, you can understand that the price of Bitcoin was at $40,000 as of March 21, and it has registered a gain of close to 18 percent within ten days. In short, you can realize that it is challenging to predict the price movements in cryptocurrencies. On March 25, 2022, the total value of the cryptocurrency market surged above $2 trillion. But we also have to realize that cryptocurrency trading hit the mark of $3 trillion on November 10, 2021. At that time, the price of Bitcoin was $69,000.
The market capitalization of Bitcoin reached $1 trillion in November 2021, but it is around $902 billion now. Its market share was estimated to be at 70 percent once. But it has reportedly fallen to about 42 percent now due to the introduction of many other cryptocurrencies. According to some estimates, there are approximately 18,511 cryptocurrencies now.
We also found that the stock markets, forex markets, and gold also suffered setbacks following the war between Russia and Ukraine. During such a crisis, it is natural for all financial markets to face significant setbacks due to the unpredictable nature of global developments. Besides, central banks, including Federal Reserve, have started tightening measures to control inflation and boost economic growth.
According to estimates by analysts, Bitcoin posted the highest volatility of 4.56 percent on March 16. They observed that the cryptocurrency’s 30-day volatility was at four percent. Its price also surged by a whopping 17 percent on March 1. In contrast, the report added that Bitcoin posted a 40 percent fluctuation in a day in 2021. At the same time, some of the popular stock markets globally reported around six percent fluctuation on several days in 2022.
The primary reason for Bitcoin’s and other financial instruments’ fluctuation is the war between Russia and Ukraine. The war that hurt trade and other economic prospects upset the calculations of the financial markets across the world.
The surge in oil prices has adversely affected the prospects of many financial markets. It also adversely affected the performance of Bitcoin and other cryptocurrencies this year. The oil price has surged by around 25 percent in the last week.
Fear of Recession
With the central banks of many top economic powers have announced their intention of increasing rates to tackle inflation, it acts as a deterrent for financial markets. If the war continues for a bit more time, the fear of recession would be natural and adversely affect financial markets. It can adversely impact the price movement of Bitcoin as well.
When you face a crisis, you will be scared to invest in a particular venture. Similar is the situation of seasoned investors also. When they realize that it is not ideal for investment because of war fears, recession, and policies of central banks, they prefer to wait for investing. Such a scenario will pose several problems for financial markets worldwide, including cryptocurrencies. But the positive aspect is that the markets can bounce back when there is an improvement in the geopolitical situation. If there is a ceasefire between Russia and Ukraine, the financial markets will also respond positively. The markets, which were down for a more extended period this year, bounced back recently, hoping there would be an amicable solution to the Russia-Ukraine crisis.