How much is the value of BTC today? This question lingers in the minds of many prospective and existing traders in the digital environment. If you’re an avid reader or trader in digital currencies, you understand how the prices of these assets keep changing.
Price fluctuations happen because of specific underlying factors. An understanding of the variables that have an impact on BTC value can help you to appreciate how the market operates. Furthermore, you can know the best time to buy or sell your digital holdings through this knowledge. Please keep reading to explore the things that influence the prices of Bitcoin and how to benefit from them.
The principle of Supply and Demand
Suppose you have a basic knowledge of economics. In that case, you understand how demand and supply impact the price of a commodity or service. As a digital asset, BTC is also subject to this law. In terms of supply, the amount of Bitcoin in the market depends on how much the miners can mint. If the market has few miners who supply few tokens, the quantity of BTC in circulation will be small.
The supply of tokens will also depend on whether the miners have the right technology and knowledge of solving complex mathematical problems. If the problems are complex, it will take time to solve and release new tokens. And the more time the miners take to mint coins, the market will lack sufficient supply, which creates a high demand for the few digital assets in circulation. Because of the meagre supply and an elevated demand, the price of BTC will hike.
Demand for BTC also plays a major role in determining the price of the digital currency. Various market factors can lead to a higher demand for BTC. For example, companies, such as PayPal, to approve BTC has created a huge demand for virtual currency.
If you’re an investor of BTC, there are opportunities that supply and demand factors create for you. For example, if you’ve sufficient capital, you can invest in BTC mining. For traders using the HodLing strategy, you can sell your assets once you see a huge hike in BTC value.
Media have a major role in determining the price of Bitcoin and digital currency in general. When news outlets dedicate their space and time to covering cryptocurrencies, many people worldwide get to know about these virtual coins. As a result of enhanced coverage, the demand for the BTC may go up as people may want to invest in it. As demand goes up, the price of BTC upticks.
On the other hand, if there is negative coverage about BTC, the price may plummet. For example, when an exchange is hacked, many people may fear investing in digital currencies, resulting in a decrease in their value.
Sometimes you may not have the time to follow up on all the current news on Bitcoin. However, you can always rely on the official website for excellent trades sensitive to media coverage of the digital coin.
Like fiat money, political happenings affect the exchange value of digital currencies. The Central Bank of a country may develop policies that can lead to printing more coins that can lead to inflation. This is because fiat currency doesn’t have the maximum pieces to print. However, BTC is capped at 21 million, making it the best store of value. And this is the reason why many individuals and companies may turn to BTC when inflation hits their investments. BTC’s price may go up when many companies and individuals are buying it.
In 2015 when the Greek economy was in the doldrums, the majority of Greek business people bought BTC. The intention was to safeguard their investments from the effects of inflation.
At the moment, most countries are in a state of stagnation due to Covid-19. Many governments have printed and pumped more money into the economy to jumpstart their economies. With the printing of more fiat pieces, inflation has hit most of these countries. People are exploring alternative investment vehicles, and BTC is one of them. The value of BTC has gone up due to this economic situation.
Governments in the world keep giving different pronouncements about Bitcoin. They’re constantly altering taxation laws touching on digital currency. Although the virtual currency is decentralized, its behaviour is influenced by these government moves. When governments make major pronouncements about BTC, prices may either plummet or upsurge. Investors may fear specific laws that hurt the operations of the digital currency.
In 2017, China took drastic measures about BTC and closed multiple digital currency websites. This step saw the value of BTC falling at a dramatic rate.
When some Asian countries made statements of regulating the digital currency industry in 2018, a 100 billion fall in the digital marketplace occurred within 24 hours.
The above examples are a clear testimony that government statements regarding digital currencies can’t be ignored. If the pronouncements are favourable to the digital currency market, BTC responds positively. However, negative statements can lead to a fall in BTC price.
The behaviour of BTC Community
Frictions in the BTC communities and lack of consensus on specific matters may impact the price of the digital currency. Also, specific moves by the community can affect the value of the digital currency. Lack of consensus may lead to the split of a community, leading to major changes, like the emergence of a hard fork.
Prolonged periods of disagreements within the community regarding the rules and the digital currency’s future can adversely affect the value of BTC. And during such times, the price of digital currency falls.
However, if communities agree on specific matters fast, the stability and value of BTC are retained. And investors can take advantage of a stable market, leading to an increase in the price of digital currency.
The production of BTC requires miners and power consumption. Miners must be compensated for producing blocks. The process of creating BTC needs huge power consumption. So, it would help if you were ready to meet these production costs.
If many miners are competing to produce BTC blocks, the mathematical problem becomes more complex. Therefore, you must be ready to meet the cost of solving the challenging problem.
Although BTC is the most famous digital currency globally, other virtual currencies are available that cry for the attention of investors. The competition from the rival currencies may impact BTC’s value. Investors may wish to diversify their portfolios by buying different virtual currencies. And this may lead to a fall in BTC prices to attract more investors.
When Bitcoin was created, many people didn’t understand the philosophy behind it and how it worked. BTC came into being in 2009 after the housing crash in the US. People were tired of big financial institutions playing fast and loose with their investments. The creator of BTC came up with a decentralized currency that gives users more autonomy over their investments. And this is how BTC was formed.
The currency’s underlying blockchain technology is designed to revolt against the centralized financial systems of the world. Many people realize that banks and governments have been giving them a raw deal regarding how the former entities manage their resources.
Initially, only a few individuals embraced the idea. However, as time went by, people gradually started appreciating the currency. Currently, virtual currency has attracted big companies and multiple individuals across the world. Its level of adoption is on the uptick.
And the level of adoption by users impacts the price of the BTC. If many people start embracing digital currency, its value will increase because of the spike in demand. Currently, many individuals, vendors, and even companies are using BTC as an online payment solution, which has seen the currency’s value go up.
Financial experts may provide various prediction trends of BTC. Depending on who’s saying what about the digital currency, its value may either spike or fall. For example, if a famous financial analyst gives a positive future outlook of the virtual currency, its value may go up. On the other hand, if there is a preponderance of negative future evaluation of the value of BTC, its price may fall.
The compensation for BTC miners changes once after every four years. The amount drops by half every time four years pass. This procedure is called BTC halving. From experience, after each halving, the market experiences a bull run. This is because the halving event decreases the rate at which coins are mined, which ultimately increases the value of the BTC coins in circulation.
As a BTC investor, it’s essential to understand the factors that affect the price of the digital currency. The knowledge can assist you in knowing the best time to invest and guard your investments. Here, we’ve given a comprehensive coverage of the main variables that affect the value of BTC.