How do you view the price fluctuations of Bitcoin?

Source: LongHash

It is generally believed that price volatility is one of the main reasons why Bitcoin cannot gain greater adoption among the mainstream public. However, the truth may be quite different. Many people are attracted to Bitcoin precisely because of its extreme price volatility.

Think about it. When did you first learn about Bitcoin? Was it from a mainstream news story that exaggerated its unsustainable price growth, or from the recent burst of a short-term Bitcoin bubble? Of course, it could also be linked to crime: maybe someone used Bitcoin to buy prohibited items on the dark web, or an exchange was hacked and lost hundreds of millions of dollars.

The point is, reporting is reporting: Bitcoin price trends, even downside ones, are emotional. While many people first encounter Bitcoin as a gambling game, some may be drawn to it once they start to study Satoshi Nakamoto’s original intentions in creating this peer-to-peer digital currency system.

Regardless of price fluctuations, the number of users is still increasing

There are many indicators that support the view that Bitcoin's high volatility is an attraction.

First, we can look at the current user base of Bitcoin and other cryptocurrencies. How do they interact with these cryptocurrency networks? According to blockchain analysis company Chainalysis, about 90% of Bitcoin chain activity is related to exchanges - from this point we can see the impact of price fluctuations on speculative behavior.

Secondly, it is now relatively easy to analyze people's interest in Bitcoin through Google Trends data. As shown in the figure above, during several periods of large fluctuations in Bitcoin, the search volume has surged. Note that this is not a phenomenon unique to the West. The figure below shows a similar trend in Bitcoin searches on Baidu in China.

Interestingly, people who write about Bitcoin, including me, know what the Internet likes to read. If you look at my contributor page on Forbes, you can see that the most viewed articles I wrote at the bottom of the page are more or less related to the price of Bitcoin or altcoins. These are articles related to Bitcoin that can also drive traffic to news websites.

The general public does not care about Schnorr signatures, sharding technology, etc. Most people simply watch the market.

The last indicator is the most direct correlation between Bitcoin price fluctuations and new users on exchanges. Whether the price is skyrocketing or plummeting, you can be sure that the number of registered users on exchanges will surge as the media reports on the price changes.

The most typical example occurred in late 2017, when Coinbase became one of the most popular apps in the Apple App Store because Bitcoin and a series of other cryptocurrencies soared to all-time highs.

On the other hand, after the price of Bitcoin halved in mid-March this year, the number of user registrations on Coinbase, Kraken and other exchanges also increased significantly.

However, the most important point is that Bitcoin is still in the store of value phase of its development, so long-term users are happy to see price fluctuations (as long as they are upward). As Bitcoin gains more and more acceptance as a non-political store of value, its price begins to become more stable (as it has in the past). Once the price finally stabilizes at a certain level, people may become more accepting of its commercial medium function.

Until then, Bitcoin will continue to grab headlines for its wild price swings, and those headlines will further bring in new users, strengthen its network effects, and make the cryptocurrency a more useful tool for everyone involved.

LongHash, understand blockchain with data.