Bitcoin (BTC) is a cryptocurrency that was created in 2009 by Satoshi Nakamoto, the moniker given to the cryptocurrency’s anonymous developer (or creators). All BTC transactions are recorded on a blockchain, which discloses the transaction history of each unit and confirms ownership.
Bitcoin, unlike traditional currencies, is neither issued nor backed by a government. Acquiring Bitcoin differs from purchasing a stock or bond for investors since Bitcoin is not a company. As a result, there are no business balance sheets or Form 10-Ks to examine, fund performance to compare, or other standard instruments for selecting an investment to consider.
So, in order to learn what factors actually impact BTC’s price and make better-educated judgments about investing in it, you always need to stay on top of your game by reading a trusted cryptocurrency blog of your choice and following the latest trends and developments on the crypto market. To make things easier for you, here are the top six factors that affect BTC’s price that you need to pay attention to at all times.
Supply And Demand
Bitcoin is limited to 21 million coins, meaning that once all Bitcoin has been mined, there will never be any more new tokens created (unless a change is made to the protocol). This fixed supply makes it an appealing asset for investors who are looking for steady returns and don’t want their money tied up in one investment for too long.
As demand increases for Bitcoin, so does its price. For example, if you had invested $100 in 2010 when one bitcoin cost $0.05, your investment would be worth about $4 million today (assuming no further investments were made).
Confidence And Hype
The next major reason for Bitcoin’s recent price movements is simple: confidence. More and more people are buying into Bitcoin and other cryptocurrencies as a way to store their wealth. This creates demand, which drives prices up.
However, this also makes it appear as if there is a bubble forming in the cryptocurrency market—which may or may not be true. However, industry experts state that the latest price drops of BTC and all other cryptocurrencies have a lot to do with this market phenomenon.
News And Events
The demand for cryptocurrencies increases when a major news event takes place that causes uncertainty about government policies on virtual currencies such as Bitcoin. One such example happened on March 11th, 2013, when the Financial Crimes Enforcement Network (FinCEN) issued guidelines for virtual currency exchanges operating in the U.S. This implies they must register as money services enterprises with FinCEN (MSBs). This led to a surge in BTC demand because many investors were worried about government regulations affecting their ability to trade anonymously.
One of the biggest factors affecting the price of Bitcoin is technological developments. When a new technology or innovation is introduced, it can have an enormous impact on the price of Bitcoin (as well as other cryptocurrencies).
Here are some examples:
- New hard forks. A hard fork occurs when there is a major change to the software protocol of a cryptocurrency. This often results in two separate blockchains that exist side by side until one eventually becomes more valuable than the other.
- New mining methods. As more people try to mine Bitcoins, they use up more computing power which requires more electricity and hardware costs, pushing up prices even further if there aren’t enough miners around to keep supply steady with demand.
- New coins are being added to exchanges. When new coins are added to exchanges, they bring liquidity into these markets and increase demand for trading pairs with these coins, resulting in higher prices for those coins as well as their base currencies like BTC or ETH.
The biggest factor affecting Bitcoin prices is regulations by governments around the world. In January 2018, South Korea banned anonymous trading accounts in an attempt to curb money laundering activities using cryptocurrencies. This caused panic among investors who sold their coins at low prices causing a huge loss in value for Bitcoin and other cryptocurrencies.
However, a few months later, South Korea lifted its ban on anonymous trading accounts and re-instated crypto trading through registered exchanges. This resulted in an increase in demand for Bitcoins leading to higher prices again
Another important factor that affects the price of Bitcoin is price manipulation. Price manipulation refers to the practice of artificially increasing or decreasing the price of an asset for personal gain. In this case, it can be achieved by buying or selling a large number of Bitcoins on an exchange using large volumes. The prices will increase or decrease as a result of this action, which creates a domino effect on other exchanges and leads to further speculation.
In a nutshell, it is speculative investments in Bitcoin that are primarily driving the price. Given the cryptocurrency’s rapid appreciation, this leaves many wondering if the Bitcoin price will rise to $100,000, or possibly even higher. It’s difficult to know exactly what Bitcoin can be worth since its value stems from use cases that have yet to be implemented on a mass scale.
In addition, there are many other cryptocurrencies to consider, which also have their own unique value propositions. These factors make predicting the future price of Bitcoin nearly impossible.