Horizen CEO: „Bitcoin will continue to fluctuate, but that’s not bad“
The volatility of Bitcoin continues to play a major role in the share price development, according to two experts.
In the 12 years since its creation, Bitcoin (BTC) has been best known for the volatility of its price cycles. Although some argue that Bitcoin is nonetheless suitable as a store of value because Immediate Bitcoin fluctuations remain constant, there are also critics of this thesis, such as Horizen CEO Rob Viglione.
„The only constant about Bitcoin and the crypto markets is that they are fraught with a high degree of uncertainty,“ Viglione told Cointelegraph. He continues: „We are witnessing in real time the birth of a new industry, a new monetary system and a new peer-to-peer economy. The creation of a new world is not going smoothly.
Bitcoin is decentralised, knows no national borders and is not subject to any government. Users can send the crypto currency quickly and anonymously. It is also publicly available and has a limited amount in circulation. The programming code foresees that the rate of increase of the amount of Bitcoin in circulation is literally „halved“ every four years until the maximum amount is reached. This is to ensure a targeted shortage.
On the basis of these halving, the crypto-analyst PlanB has designed the so-called Stock-To-Flow forecast model (S2F), which compares the existing circulation quantity (stock) with the increase rate of the circulation quantity (flow) and derives the future price development from this. With this model it is possible to bring at least some sense and constancy into the fluctuations of the share price, but here too the human element is left out. Therefore, there will always be a residual uncertainty, as Viglione believes.
„Yes, the development of the available circulation of Bitcoin is fixed from the beginning, everyone can calculate with a high degree of certainty how large the supply is today and how large it will be tomorrow, but the demand side is nevertheless subject to wild fluctuations,“ the expert says. In this respect, he adds: „Naturally, the uncertainty will diminish as mainstream acceptance increases, but it is also somehow exciting to be part of the birth of the crypto industry“.
MyEtherWallet CEO and founder Kosala Hemachandra also sees little consistency in Bitcoin’s share price development. „Especially in the trading world, we humans tend to see patterns where there are none,“ the expert says. This phenomenon, called apophenia, would suggest that the price movements of the market-leading crypto currencies should be seen as rather arbitrary. However, Hemachandra admits that price movements are subject to fundamental mechanisms:
„It is, of course, perfectly logical that the price should rise when the available supply is reduced. This is simply because demand is still the same“.
And other factors can also have an impact on Bitcoin, such as technological developments or popularity
In the course of the recent surge, the popularity of the crypto currency has also gone up, which could be a positive side effect that will help the price development in the long term, even if the volatility will soon cause a return.