Bitcoin is too volatile

This is the eleventh in a series of guest posts by Marco Streng, CEO and co-founder of Genesis Mining.

There is no doubt that the value of Bitcoin has been volatile since its inception.

In 2010, Bitcoin did not rise much, but in 2013 it rose to $1,200, fell to $400 in 2014, was around $250 in 2015, and rebounded to $450 in early 2016. Volatility is largely due to speculators. However, in a sense, this makes Bitcoin find its own value positioning. As the acceptance of the Bitcoin market increases, more and more investors conduct related transactions, and more and more merchants begin to accept Bitcoin, the Bitcoin market will gradually mature and volatility will gradually decrease.

Currently, the regulation of Bitcoin is not clear. In December last year, the price fell, falling 50% in one day. The market expects that major national regulators will issue regulations this year to determine the nature of Bitcoin regulation, which will stabilize Bitcoin prices.

Bitcoin has a market cap of only about $5 billion. This is very small relative to other industries. Therefore, it is easy to assume that a trade order has a significant impact on the market. For example, a $9 million sell order for 30,000 bitcoins in 2014 caused the price of bitcoin to drop from $400 to $260, and the market quickly recovered, indicating that the bitcoin market is still in its early stages.

The total daily trading volume of other currencies is in the trillions, while the daily trading volume of Bitcoin is only about 50 million US dollars, with a peak of 100 million US dollars. The lack of liquidity is a major issue for professional investors studying Bitcoin. However, as the market value grows and the trading volume increases, the related concerns may gradually dissipate.

In the entire Bitcoin industry, there are only 1-2 million active users. For such a small group, any negative or positive media reports are very easy to affect them. As the user group increases, the impact of the media will decrease relatively, and volatility will also decrease accordingly.