There are mumbled theories with expert quotes everywhere, but in reality, nobody knows exactly what makes the price of Bitcoin go up or down. Social media is ablaze with short-term forecasts, and you can find plenty of people on the internet who will gladly share their predictions for what the next Bitcoin price move will be.
But when it comes to how much Bitcoin is worth today, there are several factors that contribute to its fluctuations in value. The main driver is speculation about how big a digital currency should be — and if it’s even possible to calculate an intrinsic value at all.
Generally, when a cryptocurrency is first introduced to the market, it is used as an investment tool. This means many investors will buy into the currency just because they believe in the technology and believe that its future value will be high.
The fact that Bitcoin was only a few cents per unit at the time of its release is proof that many people bought it without any knowledge on how to use it. On top of this, Bitcoin has not yet reached its final form, which could mean that its final price could be much higher than what investors paid for it today. When people first buy Bitcoin, they are buying low and selling high, so this can lead to profit for some investors.
In this article, we will consider some of the factors that influence the price of Bitcoin in the cryptocurrency market.
Supply and Demand
Bitcoin uses supply and demand to determine its price. In this context, supply refers to the amount of Bitcoin available in circulation, and demand is how much people want to buy or sell Bitcoin at a certain price point. When there is a strong demand and a short supply, the price rises. Conversely, if the supply is high but the demand is low, the price drops.
Competition
Bitcoin’s rise in popularity has led to a multitude of alternative cryptocurrencies being released with each trying to offer something unique. These competitive pressures have resulted in large price fluctuations for Bitcoin over the last few years.
Currently, many other altcoins are in direct competition with Bitcoin such as Ether (ETH), Tether (USDT), Binance Coin (BNB), Polkadot(DOT), and Cardano (ADA). Interest in these other cryptocurrencies can lead to a decline in the price of Bitcoin.
Regulation
The legality of Bitcoin varies in different countries. Some countries have banned Bitcoins or declared it illegal to purchase goods with them (FIAT) online. The use of Bitcoin may be a criminal offence in some jurisdictions punishable with fines, time in prison, or both. Regulations mostly have a negative impact on Bitcoin prices because strict regulations result in less interest, which leads to a decrease in price.
Availability in Exchanges
The price of Bitcoin is also impacted by the relevancy and liquidity of exchanges they are traded. For example, GLBSE was closed when trading was stopped due to DDOS attacks and fraud allegations on the site, which created a panic as investors tried to pull out their investments — this will impact the Bitcoin prices across exchanges worldwide as people bought and sold Bitcoins for USD elsewhere at lower prices than for Bitcoins at GLBSE.
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