Why Bitcoin Price Drops and What causes the Bitcoin price to drop is a question that many people have asked themselves before. Not only does the Bitcoin price have a volatile nature, but it can also be affected by external forces, like exchange rates and news articles. However, there are factors that cause the Bitcoin price to drop – so what are they? Find out in this article!
Why Bitcoin Price Drops?
There are a few reasons why the price of Bitcoin can dip. Firstly, if there is a news story that affects the value of Bitcoin, this will cause the price to drop. For example, if there is an outbreak of a virus that affects cryptocurrency exchanges and reduces the demand for Bitcoin, then this will cause the price to go down.
Secondly, if there is a significant increase in the number of Bitcoin transactions, then this will also cause the price to go down as there is more competition for limited supplies of Bitcoin. Finally, if there is a large sell order on the exchanges, this will cause the price to drop.
Effects of the Scaling Problem
Bitcoin prices have been on a steady decline since early December when the scaling debate first arose. This can be attributed to two main factors: the lack of progress made in resolving the scaling debate, and the continued decrease in Bitcoin’s value.
The scaling debate refers to a disagreement between Bitcoin’s developers about how to better scale the network. There are two main camps: those who support increasing the block size to allow for more transactions per second, and those who support using a different payment method (such as SegWit) instead. The disagreement has been ongoing for years, with no clear solution in sight.
The decreased value of Bitcoin is due to a number of factors, including concerns about its long-term stability, the decreasing popularity of online shopping, and the rising value of other cryptocurrencies. These issues have caused investors to pull their money out of Bitcoin, leading to its price decline.
Centralization of Bitcoin
Bitcoin has recently come under fire from critics who argue that its centralized structure is a major inhibitor of its growth. These critics say that the current distribution of Bitcoin wealth favours early adopters and blocks larger transactions from being processed.
This concentration of power has caused the Bitcoin price to drop in recent months, as investors nervous about the future of Bitcoin pull their money out of the market. This trend could continue if things do not change, as more and more people may decide to sell their Bitcoins in order to buy other assets.
If this trend continues, then it may be difficult for Bitcoin to achieve widespread adoption as a form of currency. Centralization can also lead to security issues, as it becomes more difficult for hackers to steal Bitcoins. If this happens then it could damage Bitcoin’s reputation. And make it harder for people to trust it in the future.
Hard Forks
Bitcoin price drops are not always a bad thing. In fact, some say that hard forks are actually good for the cryptocurrency. Because it allows for more innovation and improvement.
For example, think about what would happen if Bitcoin remained unchanged for years on end. It would become increasingly difficult to transact as more people started using the same currency. This is why hard forks are important. They allow different factions of miners to create their own versions of Bitcoin. Which leads to more variety and growth in the market overall.
Moreover, hard forks can also fix problems with the blockchain. For example, in November 2017 a hard fork was created to fix the infamous bitcoin cash ABC fork. This event led to a lot of financial losses for people who had invested in ABC coins. But it also led to the creation of BCH, which is currently one of the most popular cryptocurrencies on the market.
Mining Difficulty
Bitcoin mining difficulty has increased exponentially over the past few years, and this trend is likely to continue. The reason for this is that the number of Bitcoin nodes on the network has grown from around 3,000 in 2012 to over 10,000 today. This increase in the number of nodes has resulted in an increase in the amount of data that needs to be processed to find a new block, which in turn has led to an increase in the mining difficulty.
