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Here’s Why Bitcoin Is So Volatile Right Now

Here’s Why Bitcoin Is So Volatile Right Now

During the last year, value of Bitcoin climbed from $1,000 to almost $20,000 before dropping to around $13,000 at the end of 2017. Ever since the beginning of the 2018, value of Bitcoin has been changing from day to day, which also had effect on other cryptocurrencies such as Ripple and Ether.

The extreme volatility of Bitcoin has raised many questions, such as when to make an investment or should investors make one at all until Bitcoin is more stable and reliable.It didn’t help that the successful companies such as Steam, one of the world’s biggest video-game services, in December has stopped accepting Bitcoin because of its volatility, announcing that ‘it has become untenable to support bitcoin as a payment option’.

Along with companies giving up on Bitcoins, its rates are affected with things such as geopolitical events and even bad press. For example, when South Korean government in January threatened to ban cryptocurrencies, the value of Bitcoin significantly dropped. Similar thing happened in early September of 2017, when the People’s Bank of China officially banned an Initial Coin Offering (ICO), calling it a threat to country’s economic and financial stability. The bank stated that cryptocurrencies cannot be used on the market which resulted in both Bitcoin and Ether value droppings.

Public perception of these events, their later behavior and all the hype media creates around it proved to be a powerful agent in changing the value of the Bitcoin.

Both critics and those who support the technology agree on the following – Bitcoin is different from everything that came before it and it’s still very new in the world of business. Its enormous potential and uncertain future is what scares the governments, companies and individual investors. The governments and financial institutions are afraid for the stability of the market as we know it, and others, naturally, are scared of failure and losing the money.

What this means for startups planning the ICO

Rather than going on a traditional venture capital route, many startups nowadays are raising money through an initial coin offering (ICO). In simple words, companies are using ICO as a mean of rising funds through releasing its own digital currency in exchange for bitcoin (or other cryptocurrencies). 

In an ICO, cryptocoins or tokens are usually compared to shares of a company sold to investors in a traditional Initial Public Offering (IPO) transaction. If ICO campaign turns to be unsuccessful, meaning the new company failed to raise the funds required by the campaign, the money is returned to investors. 

An Initial Coin Offering (ICO) is interesting for new companies mostly for two reasons; First is that ICO is a way for startups to bypass the complicated and strictly regulated process of raising the funds from banks and venture capitalists, and second – they’re looking for easiest way to attract investors who are bit tired of getting things done through initial public offerings (IPOs).

Concerning the fact that over the last few months the hundreds of millions of dollars are being spent through ICOs, we can without doubt say that this trend in raising money for the startup companies is here to stay. On the other hand, frequent changes in value of Bitcoin are raising many questions, and one of them is what this means for the startups planning an ICO?

To get the right answer to this question, one must stay informed and dig deeper into reasons why the Bitcoin value is so volatile despite the fact that blockchain technologies and cryptocurrencies are more popular than ever. 

If you’re planning an ICO any time soon, have in mind the following:

1. The technology is new but so is your business

The-technology-is-new-but-so-is-your-business

If you are new in the world of business and also starting your company by using this new technology and approach to raise the funds – you have to be careful and do your research prior to starting an ICO. Cryptocurrencies may sound as an easy way to go where you want to be, but do not make any rush decisions.

Ask yourself if your project or product is useful and practical and do a market research. If not, your tokens would not be considered as secure and you could lose the game before actually starting it in a full capacity. If your project is not ready to deal with the market’s volatility, it might be the best to wait. It’s not that hard to enter an ICO, so you will have your shot at it later.

2. Be rational with your budget

Be-rational-with-your-budget

So called financial discipline is the thing you should exercise on a daily basis, especially if considering and ICO. Do not invest all you have in cryptocurrencies . 

Don’t be afraid to be a bit conservative, so allocate half of your budget to cryptocurrencies, while the rest can stay in fiat currencies. Wait for at least half a year to see what is happening with your tokens and make sure to keep track of all potential crypto gains and losses. 

3. Be informed about the market changes and new trends

As already mentioned, the media is on to Bitcoin and all the changes and development around it. Same goes for the other cryptocurrencies and all the news related to it, so make sure you read and follow the news, government statements and tech blogs.

Being ‘cryptoliterate’ is a new thing, but the very fact that we already have a word for it, says a lot!

Check the Bitcoin prices on a regular basis to get a sense of what affects the droppings in its value and compare it to previous times when same thing happened. This is how you can educate yourself on the subject, but also learn to be more critical towards opinions of both critics and supporters of the new technology and approach offered by an ICO.

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