You may have noticed that the price of Bitcoin goes up & down. One day, it soars & the next day it tumbles. So, what determines the value of Bitcoin? This is what we are going to discuss in this article, i.e. Factors the Influence the Price of Bitcoin!
Unlike traditional currencies, bitcoins not issued by a central bank or agencies backed by a government. Therefore, monetary policies, inflation rates or economic growth doesn’t contribute to the growth and decline of the value of Bitcoin. So, what determines the price of Bitcoin? Bitcoin prices mostly influenced by the following factors:
Supply & Demand for Bitcoin
The countries which don’t have fixed foreign exchange value can control how much of their currency circulates by adjusting the rate of discount and engaging in open market operations. The same applies to Bitcoin. The supply of Bitcoin mostly impacted in two different ways. 1. The bitcoin protocol allows new bitcoins to be invented at a fixed rate and the rate has been fixed in such a way as to slow its value over time. 2. The supply of bitcoin directly connected to the number of bitcoins the system allows to create. This number estimated at 21 million and once this number is reached, bitcoin miners can’t be able to create new bitcoins.
Cost of producing the bitcoin through a bitcoin mining process
Even though the bitcoins virtual, a lot of electricity required to create new bitcoins, through the bitcoin mining process. Bitcoin mining relies on complicated specific hardware equipment which requires more electricity to operate. And also, it requires software and also assistance from bitcoin miners who experienced to solve cryptographic math. The bitcoin miner who solves the math problem will rewarded with a block of newly minted bitcoins and it will be influenced the price of bitcoin.
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Number of competing cryptocurrencies
Among all other cryptocurrencies, Bitcoin may be the well-known cryptocurrency that grabs the attention of investors. Apart from bitcoin, there are thousands of other tokens vying for user attention. Since almost all investors are looking to invest in bitcoin, the price of this coin always remains on the top.
Regulations and Other Internal Governance
The rise of popularity of bitcoin and other cryptocurrencies has triggered the regulators to debate how to classify digital assets. The price of Bitcoin will also greatly depend on Commodity Futures Trading Commission (CFTC), which considers Bitcoin to be a commodity.
These are the few factors that determine the price of Bitcoin. Apart from these, the price fluctuations will also happen for various reasons including availability, and media coverage.
The demand for Bitcoin is ever increasing with the hope that the price of Bitcoin will soar high! If you’re the one looking to invest in Bitcoin and start earning a second income, then it’s the right time to start your investment! Do proper research and learn the tactics to earn more!
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