What Factors Determine The Price Of Bitcoin 1 In The Market?
Bitcoin price depends on the international currency exchange rate. Bitcoin has a fixed number of 21 million BTC, which is equivalent to other currencies and gold by its limited supply and resulting high value. On May 1st, 2010, Bitcoin was priced at $0.003; on May 1st, 2017, it was $2,364.
Bitcoin price is influenced by supply and demand:
When more people want to buy Bitcoins than sell them (demand), the price increases and vice versa (supply and demand), if you need some information about demand and supply theory in economics, this article is a must: Economics 101: Demand and Supply.
The number of users influences Bitcoin price:
The higher this number is, the more likely it will be that Bitcoin will become a world currency; it could be said that Bitcoin’s price increases as its adoption rate as a payment method or as internet money does (For example, as people start to pay with Bitcoin more often, the price increases).
The ease-of-use influences Bitcoin price:
If it’s difficult to buy or sell Bitcoins, you will see fewer people using it as a currency. For example, countries with capital controls make a good case study since fewer ways to get money in and out of those countries. The demand for Bitcoin increases as people want to buy it to transfer their money out of those countries.
In 2017, China was an excellent example as the country has introduced capital controls, and people have turned towards Bitcoin as an alternative currency and https://allin1bitcoins.com . This includes ICOs that have been created in China or that target Chinese citizens to avoid those capital controls.
Bitcoin price is also influenced by security:
As mentioned before, this currency has a huge advantage over traditional currencies and gold since it cannot be forged. Of course, this doesn’t mean that it is 100% safe or that there won’t be attempts to hack into the network or steal Bitcoins. Nevertheless, the more secure Bitcoin will be, the less likely it will be for criminals to try and hack into the system.
Bitcoin price is also influenced by how easy you can convert other currencies in Bitcoin:
If fewer places accept Bitcoin as a payment method, then this will reduce the demand and, therefore, its value in the market.
The factors mentioned up until now affect Bitcoin’s price directly; they either increase or reduce its value. Some examples of indirect factors are:
- Bitcoin price rises when the mainstream media talks about it because people become aware of this new currency and decide to try it. This boosts demand and therefore increases Bitcoin prices in the market.
- Bitcoin price falls when the mainstream media talks about it because people are aware of this new currency and decide to sell their Bitcoins to avoid being too speculative with their money. This reduces demand, which also reduces Bitcoin’s market value.
- Bitcoin has been banned by some countries that have decided not to allow their citizens to use it. This reduces Bitcoin’s adoption rate in those countries and affects the market price.
- Bitcoin’s price is also influenced by regulatory bodies (the US SEC, for example). If they say something positive about Bitcoin, it will likely increase its value; if they say something negative or that contradicts previous statements, it will probably reduce the price of Bitcoins on the market.
The number one factor that affects Bitcoin’s price is supply and demand. If more people want to buy Bitcoins than sell them, their value will increase since there are more buyers than sellers. If this doesn’t happen, then it means that either there are too many people selling Bitcoins or too many people that want to buy them; in other words, there is an oversupply.
Bitcoin’s price will increase when too many people sell it since the demand will be higher than supply. The opposite happens when there are more buyers than sellers, which will cause Bitcoin’s price to decrease since its value is higher than demand.