What's behind the jumps and bumps in Bitcoin's price?

Wednesday, 15 November 2017, 08:06:03 AM. The price of Bitcoin has dropped to around $8,000 in the past few days, after almost hitting $10,000 in the past month. What's driving the price?
Photo: There are a number of factors driving Bitcoin's extreme volatility. (Reuters: Benoit Tessier) The price of Bitcoin has dropped to around $8,000 in the past few days, after almost hitting $10,000 in the past month, and rising more than 1,850 per cent since 2015. All of this shows how volatile the currency is, prompting the question, what leads to such huge movements? Our ongoing research reveals four factors that affect the price of Bitcoin. These include media hype and uptake by peers, political uncertainty and risk (such as the election of Donald Trump or the vote for Brexit), moves by governments and regulators, and the governance of Bitcoin itself. It is likely the last factor that has driven the latest drop in the price, as a proposed Bitcoin split (or "fork") failed to gain support from developers towards the end of last week. The split would have doubled the number of coins in circulation (as previous splits have) and increased transaction speed. External Link: Chart: What drives the price of Bitcoin? 1) Animal spirits Economists have long had a notion that psychological factors affect investor decisions. This is called "animal spirits" and refers to investors making decisions based on the behaviour of other market participants and their own intuitions, rather than hard analysis. Analysis of the price of Bitcoin shows that positive media coverage is one of the main factors driving the price. Positive media coverage of new technologies causes a well-known...Read more
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