Bitcoin, a decentralized digital currency that was developed in 2009 and took over the world in 2017 due to its soaring price, is now taking the crypto market by more surprise as the price is almost 5 times more than what it was back then.
The year 2021 ended the bull-run for Bitcoin and since then the prices have been going up each day, the continuous escalating price of Bitcoin has been influencing everyone so much that its everyday price has become a buzzing question.
Why is it important to know these factors?
For a large number of people Bitcoin trading is the major motive of staying up-to-date with its prices, because the digital currencies are so volatile a trader must keep an eye on various details related to Bitcoin before they can make money with it.
To make money by trading and understanding the Bitcoin market, it is vital to learn about some factors that influence the price of Bitcoin. However, traders also benefit from platforms like The BitQT to get a better understanding of the fluctuating crypto market.
If you are a trader yourself or trying to understand the things that determine Bitcoin’s price, here are some detailed points that will certainly help you get the idea.
Supply and demand
People who have even a basic understanding of economics will easily understand this phenomenon. Every product that has value is somehow affected by the law of supply and demand, and Bitcoin is not an exception.
The amount of Bitcoin that is available on crypto exchanges is much less than the actual number of Bitcoin that exists in several cold wallets. There are two core features of Bitcoin that affect this law.
1.The speed at which Bitcoin is produced is the first feature because Bitcoin is being mined at a fixed rate, and it is getting slower every day because the rewards get halved as more coins are mined. This means that even if the demand goes high the coins will be mined at a fixed speed.
2.Another thing is Bitcoin’s supply cap which is limited to only 21 million. This means that there will be a time when all the Bitcoins will run out and other factors such as its usability will determine the price.
Influence of social media
It has been found that social media is now massively influencing the prices of Bitcoin and other cryptocurrencies too. This means that if the media is focusing on a certain currency, it will lead to a better understanding of it in the general public.
Another example of social media influencing the prices of Bitcoin is famous figures such as Elon Musk tweeting about Bitcoin and causing people to get on the Bitcoin bandwagon. These comments on Bitcoin, by famous figures, have become vital for traders as these decide the bearish or bullish waves.
Regulations related to Bitcoin
Recently Canada has made regulations that require the people who use Bitcoin and other cryptocurrencies to register with the FIU. This means that countries are now taking matters related to Bitcoin seriously as it can be used for the cause of money laundering and financing terrorism.
Several countries have banned Bitcoin due to this reason, the usage of Bitcoin in unbanned countries and the rules set by regulatory bodies have a great impact on its market value.
Decisions of Bitcoin community
The decisions of the Bitcoin community decide its future, if a part of the community has different views on a certain thing the prices can become unstable. An example of the community affecting Bitcoin’s ecosystem is when in 2017, a group of people decided that the block size should be increased which later led to the birth of Bitcoin cash.
Bitcoins are produced by mining and to mine, a single coin’s various aspects exert influence on it. Things like the consumption of electricity and the cost of high-end hardware are some examples of the cost. In the beginning Bitcoin could be mined on low-end devices without dedicated graphic processing units however, it’s mandatory to have various GPUs to mine a coin. This is because the mining competition has been getting tough every day which requires more electricity consumption for Bitcoin’s production.
Like all products Bitcoin also has its competition in the form of other altcoins such as Ethereum, Ripple, ADA, and Binance Coin. These altcoins are supposed to affect its price as they are the competition and to some extent but not a lot due to Bitcoins towering price.
Either it is for understanding or investors, it is essential to know about the above factor that mainly influences the price of Bitcoin. These factors are crucial for beginners who are getting into crypto markets to raise profits for themselves.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.