Bitcoin first made the news rounds in 2009 when it was created anonymously by someone named Satoshi Nakamoto. At that time, there were mixed reactions from enthusiasts and business analysts. While some invested in this digital currency, many ran away from the opportunity out of fear. However, those who decided not to invest in Bitcoin early now regret that decision.
When it first started, the value of Bitcoin was not up to a cent. But some twelve years down the line, the price of Bitcoin now ranges between $30,000 and $50,000. In April, Bitcoin reached an all-time high of over $60,000. That means if you had about ten Bitcoins in 2009, the value of those coins would have hit more than three million dollars.
The stability of Bitcoin, over these years, has made many traders investors. For this reason, more and more people are picking up interest in Bitcoin and cryptocurrency as a whole. However, not many people understand the rules of cryptocurrency. Since Bitcoin is the most influential and popular currency, many enthusiasts want to know how the value of Bitcoin is determined.
What Affects the Value of Bitcoin
Because Bitcoin is a cryptocurrency, many forget that it’s a commodity. Like many other commodities, some factors will affect the price of the entity. A commodity like food increases in value because of the demand from the consumers. On the other hand, commodities like gold have more value because they aren’t readily available. The market trend of Bitcoin behaves similarly to the gold market because Bitcoin is a scarce commodity. Presently, the amount of Bitcoin supply that we have is not up to 20 million. The predicted maximum supply of Bitcoin is 21 million. This is nowhere near enough as Bitcoin keeps increasing in its demand. Let’s look at the factors that affect the price of Bitcoin.
Supply and demand
The supply of Bitcoin depends on the number of Bitcoin available for sale in the market. Every seller has the liberty to choose the price they want to sell their Bitcoin. The moment one seller has a lower price, almost every other seller has to adjust. So, in most cases, it’s preferable if Bitcoin buyers are more than the sellers for the value to increase.
Likewise, when the demand for Bitcoin increases, the value of Bitcoin increases. That’s because there’ll be fewer coins in circulation. Supply and demand are the main factors that affect the price of Bitcoin.
Mining
Bitcoin miners are people who help secure the Bitcoin network with their computers. When miners complete a block, they receive rewards in Bitcoin. They can now sell back this Bitcoin into the market or keep it. This amazingly affects the market.
Regulations and media
Government regulations and media play a crucial role in Bitcoin value. Huge players like China have been responsible for many crashes in bitcoin’s worth, including the most recent crash in May. When a government policy or regulation supports Bitcoin, the value increases, and when it doesn’t, the value decreases. This happens because government regulation always affects the demand and supply of Bitcoin.
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For it to have survived twelve years, Bitcoin has passed the test of time. However, it’s advisable to do some research before investing in Bitcoin, season and events really matter.
http://www.thebitcoinerworld.com/what-determines-the-price-of-bitcoin/