How does the inelastic supply of Bitcoin affect its price volatility?

3 answers

• Dec 25, 2021 · 3 years ago
  The inelastic supply of Bitcoin plays a significant role in its price volatility. Due to the limited supply of Bitcoin, any changes in demand can have a substantial impact on its price. When demand increases, and there are more buyers than sellers, the price tends to rise rapidly. Conversely, when demand decreases, and there are more sellers than buyers, the price tends to decline. This limited supply creates a situation where even small changes in demand can lead to significant price fluctuations.
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• Dec 25, 2021 · 3 years ago
  The inelastic supply of Bitcoin is a key factor contributing to its price volatility. With a fixed supply of 21 million coins, any changes in demand can result in sharp price movements. When demand exceeds supply, the price tends to rise, as buyers compete for a limited number of coins. On the other hand, when demand decreases, the price can experience a significant drop. This limited supply characteristic of Bitcoin makes it susceptible to price volatility compared to traditional fiat currencies.
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• Dec 25, 2021 · 3 years ago
  The inelastic supply of Bitcoin is a fundamental aspect that influences its price volatility. Unlike traditional currencies that can be printed or minted at will, Bitcoin has a fixed supply, which means that the number of coins in circulation cannot be increased beyond the predetermined limit. This scarcity creates a situation where any changes in demand can have a disproportionate impact on the price. As a result, even relatively small shifts in demand can lead to substantial price fluctuations. It's important to note that this characteristic of Bitcoin is not unique to any specific exchange, but rather a fundamental property of the cryptocurrency itself.
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