It's been an eventful few weeks for Bitcoin. After several weeks in which the cryptocurrency broke one record after another, there have been signs of corrections and profit-taking in recent days. At one point, Bitcoin lost one-third of its value before making up almost all of the losses the following day. This fast-moving unpredictability makes the cryptocurrency a high-stakes but exciting investment for traders who are willing and able to take the risks. For everyone else, it's worth taking a little time to understand what has been causing these volatile swings before trying to draw conclusions about what they actually mean for the long-term future of Bitcoin.
What's caused recent Bitcoin volatility?
Bitcoin prices started moving significantly after a plan to fork the software that runs the currency was cancelled. Splitting the currency would have increased competition and reduced the fees that are associated with using Bitcoin. However, it would have also increased uncertainty around the platform and could have disrupted its governance. Therefore, the price of Bitcoin initially soared on the news that the fork had been abandoned, initially touching numbers above $7,700.
Then the crash came and Bitcoin lost one-third of its value incredibly rapidly, falling through the $7,000 and $6,000 barriers very quickly. Following the weekend, the cryptocurrency then rebounded to end up much closer to, although still significantly below, the highs that it had touched less than a week earlier.
Will there be more of this?
This volatile stretch shows that any news or rumour about Bitcoin still has the ability to cause massive swings in the value of the currency. As many people trading in Bitcoin are new to the cryptocurrency concept, any rumour has the ability to move the markets quickly and significantly before traders have really understood what it means. Expect to see more movements like this in the coming months.