BTC Inc

The fluctuations in bitcoin’s value acts as both a draw and a deterrent to investors, in what has been described by many commentators as a modern-day gold rush. The true extent of bitcoin’s investment volatility can be best understood by examining two hypothetical investment scenarios:

  • Investor A bought $10,000 worth of bitcoin on March 14, 2020. At the time, they were able to buy roughly two bitcoin. Having held them for exactly twelve months, he exchanged their bitcoin back to U.S. dollars on April 14, 2021, receiving $112,000, and generating a profit of $102,000, or an annualized return of 1,120%.
  • Investor B bought $10,000 worth of bitcoin on April 14, 2021, the same date Investor A chose to sell. They were able to buy roughly one quarter of a bitcoin. Just 5 weeks later, their bitcoin holdings have dropped in value by 18% and are worth around $8,200, representing a loss of $1,800 if sold then.

With its capacity to deliver such lucrative returns, it’s easy to understand the allure of bitcoin investing, and why many overlook the risks associated with its volatility.

However, it is more difficult to comprehend why the value of bitcoin is so volatile. To do so, it’s necessary to examine the fundamental principles underpinning the Bitcoin phenomenon.



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