As the most widely used decentralised digital currency, it’s not surprising that various factors influence the value of Bitcoin. For beginners who didn’t know, Bitcoin is the first cryptocurrency to be developed – it was introduced to the public in 2009 by its creator, who goes by the name Satoshi Nakamoto but prefers to be anonymous even up to this day. The development of Bitcoin inspired the birth of thousands of cryptocurrencies that people are now utilising.
It’s given that the crypto market has a highly volatile nature, and due to this behaviour, some crypto enthusiasts’ first thought in the morning would probably be, “How much is Bitcoin worth today?” This is pretty much reasonable since the changes that happen in the market are very rapid; who knows where Bitcoin’s price can go overnight? Most importantly, the question we should be thinking of would be what factors affect the price of Bitcoin?
Every crypto trader knows and understands the risks that come with crypto trading – aside from the volatile nature; you’ll be surprised at how high the number of scamming cases is. Luckily, platforms like Crypto Genius exist, which connect users to the best reliable brokers around the globe to develop financial knowledge and trading skills for crypto enthusiasts who wish to earn or increase profits in this industry.
Major factors that affect Bitcoin’s price
What influences the values of cryptocurrency? Various factors influence how Bitcoin’s price rises and falls. To give you an idea, we’ve compiled five of the major factors that play a vital role in determining the values of cryptocurrency.
1. Supply and Demand of Bitcoins
While Bitcoin is one of the digital assets that are often utilised in trading on platforms, the total value of the traded coins only represents a small percentage of the overall supply in circulation. Bitcoin is not always available for purchase since the majority percentage of it is held as savings. Given this, one factor that affects the price of Bitcoin is the acceptance of users.
A coin’s popularity indeed increases its worth, while a low demand lowers its value – this means that the status of the increase or decrease in demand and supply affects the price of Bitcoin. Throughout the years, Bitcoin has been utilised to conduct online transactions by many people, investors, and corporations. Due to this, the widespread acceptance of Bitcoin and other cryptos will surely affect the increase of its price in the future.
2. Bitcoin Rules and Regulations
Due to the rapid and uncontrolled increase when it comes to Bitcoin and other cryptos’ popularity, directors are constantly debating how to manage these digital assets: the Securities and Exchange Commission (SEC) classifies cryptocurrencies as securities, the Commodity Futures Trading Commission of the US (CFTC) identifies it as a commodity.
If these rules become too strict or repressive, the value of Bitcoin will certainly drop; but if they are in favour of the behaviour of the crypto industry, they can fuel the rapid growth of cryptocurrencies worldwide. Unlike the traditional currencies, Bitcoin is not linked to central governments, which makes these rules apply the direct effect of the price to their investors. Government statements play a huge role in determining the rise and fall of its price.
3. Power of Media
Research has shown that media has the greatest effect on the reputation of almost anything in the world, and yes, that includes the price of Bitcoin and other cryptocurrencies. The majority of the people are spending, if not a majority, at least half per cent of their day online – whether it be on social media or other platforms that guarantee information and entertainment.
The increased media attention paves the way for the public – whether crypto enthusiasts or not – to gain an understanding of cryptocurrency and digital assets like Bitcoin, which can draw new users to the world of cryptocurrencies. The power of media also impacts the power of mouth – when a crypto investor finds something knowledgeable or interesting in the media, chances are he will also inform his peers about it, resulting in a wildfire due to the power of social media.
4. Competition in the Market
As the first cryptocurrency to be developed and garnered the interest of millions of people, Bitcoin is no doubt the most well-known and accepted cryptocurrency globally. However, as the years go by, thousands of other cryptocurrencies have emerged, such as Ethereum and Tether, which leaves some crypto investors giving it a try.
While it’s true that Bitcoin remains the most valuable crypto when it comes to market cap, altcoins like Ethereum, Tether, Cardano, Binance Coin, and Polkadot make it to the top of the list as big competitors of Bitcoin. Market capitalisations also play a huge role in influencing the price of a cryptocurrency in this volatile market.
5. Bitcoin Mining
The bitcoin agreement permits the creation of new bitcoins at a set rate – while miners process groups of transactions, new bitcoins are added to the market, and the rate at which these coins are introduced is programmed to slow over time. Thus, the number of Bitcoins allowed by the system to enter the market also affects the supply. For now, this number of Bitcoins allowed is at 21 million – once this is completed, mining operations will put an end to producing new bitcoins.
Miners use excavators to mine cryptocurrencies, and this process becomes increasingly challenging over time. As the cost of mining virtual cryptocurrency increases, then the price of Bitcoin would be greatly affected.
Final Thoughts
Before entering the cryptocurrency market and engaging in Bitcoin currency transactions, all investors must prepare – physically and mentally. The considerations listed above are just some of the factors that affect the price of Bitcoin, and there is more to learn out there. Having this knowledge before entering the market saves you from experiencing a major loss and helps increase your long-term income.
Despite the list of significant factors that influence the worth of Bitcoin, it’s important to understand that these cryptocurrencies are still developing over time, which means they rapidly change from time to time. Given this fact, it’s also ideal to study and do research about the behaviour of the market so you’ll know how to manage or control your funds and put the market’s volatile nature to your advantage.
