5 main factors that affect the price of Bitcoin

As with most altcoins, Bitcoin is very volatile — that is, its value changes dramatically. For example, in November-December 2017 its rate has increased at least 220 percent. By contrast, in January-February of 2018, the price suffered a sharp correction and lost 60 per cent, before plunging into a protracted bear market length in a few months. 2019, with the return of the bull market, only confirmed sverhpredelna character largest cryptocurrency.

If the question of the abandonment of investment in Bitcoin because of high volatility is not necessary, it is important to think about the factors that determine the UPS and downs of Bitcoin. The majority of cryptocurrencies are correlated with the main crypto-currency that is tightly linked to her. So fluctuations in BTC have the same effect on most coins. Definition of the factors behind the UPS and downs of BTC, will allow us to better predict and understand the developments in the cryptocurrency market as a whole.

Note that the influence of these factors on the price of Bitcoin and other cryptocurrencies is often exaggerated. The reason is that the world of cryptocurrencies is relatively young and confusing to some investors. Well, this leads to a disproportionate reaction to the purchase or sale.

Of course, today's present is not an exhaustive list, but these factors, in principle, be regarded as fundamental.

The contents

The law of supply and demand

Anyone who is even slightly familiar with economic theorey understands that BTC and other cryptocurrencies are subject to the law of supply and demand.

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Offer Bitcoin can be compared to gold, since there is a predefined maximum number of coins in circulation — as well as the total amount of gold on Earth. The comparison does not end there, because the gold before you get to the point of sale, miners extracted from the ground.

Similarly, the miners “mine” new bitcoins. To do this, miners rely on the computational power of their computers, selecting solutions of mathematical problems. After that, they get rewarded in BTC that increases the supply of coins on the market.

The demand for bitcoins works exactly the same as in the case of gold and other valuable resources. The more new investors want to buy BTC, the higher the price increases.

The influence of the media

Various studies have shown that media is an important source of influence on the price of BTC.

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Wider media coverage leads to a better understanding of crypto-currencies of the broad masses. It has the potential to attract new people. Positive coverage of Bitcoin in the media also generally leads to higher prices, while negative is having on the price of the cryptocurrency opposite effect.

It is also important not to overlook the massive effects of certain of the news media. Captainvalor that detected in the media with certain information, quickly tell your colleagues who will do the same. Thanks to the power of social media news travels at the speed of a forest fire, reflected on the price of the asset.

A simple example: some large companies from the world of traditional Finance has announced a very strong interest in the Ripple and the desire in the near future to test it in real conditions. This statement is likely to trigger a sharp rise in the price of XRP token. Many investors would find attractive Ripple because of the intention to support said major player. This will prompt them to invest in a token project.

Even so, you must be aware of the latest news about Bitcoin and cryptocurrencies, not to miss out on future bull or bear cycles of the stock market.

Political events

As in the case of traditional currencies, on exchange rates of cryptocurrencies influenced by political developments.

However, the changes in the price of Bitcoin, caused by political events, usually the opposite of what happens with the currencies of Central banks. Distrust of the economy of any country is pushing people towards risk and preference of cryptocurrencies and traditional currencies.

Since Bitcoin is a conventional leader among cryptocurrency, its price increases first, and then affects the other currencies in the market.

We can recall the example of the Greek crisis in 2015, when a number of Greek traders invested in Bitcoin. A similar effect was observed when Britain decided to withdraw from the European Union, or when Donald trump was elected President of the United States.

Finally, in recent months the price of Bitcoin was also affected by a trade war between the US and China and the complex relationship Donald trump with Iran.

Government decisions on regulatory changes

Because Bitcoin and cryptocurrencies – a new concept, difficult for governments to take any medium-term position in their relationship.

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Governments constantly change-related regulation, taxation and other things. Although Bitcoin is decentralized and independent of Central governments, the regulation decided by the latter, directly affects the system. As a minimum, because it affects investors wishing to invest in the cryptocurrency. The fear caused by statements or decisions of governments, will definitely cause a fall in the price of Bitcoin.

When China, the world’s largest cryptocurrency market, at the end of 2017 took very tough decisions in relation to the ICO and Bitcoin and have decided to close several trading platforms, BTC price fell sharply.

We also remember, for example, the collapse of the cryptocurrency market at $ 100 million in just 24 hours in February 2018. This happened after the announcement of potential regulatory changes in several Asian countries (China, India, South Korea).

Conversely, when the government of Japan has recognized Bitcoin as legal tender, in the following months the exchange rate has increased. Therefore, you cannot neglect the impact on the price of Bitcoin and other cryptocurrencies decisions of governments.

Changes in the Bitcoin community

Another factor of instability is the largest cryptocurrencies lies in the fact that the project is managed by the community, which is constantly trying to find consensus and to ensure its medium and long term future. In addition, accepted community decisions affect the Bitcoin blockchain, and therefore the ecosystem as a whole.

Periods of instability in the community related to the regulation of Bitcoin and its future, often had a negative impact on the price of the coin. However, some time after the fork Bitcoin Cash in August 2017, we observed a trend to upside recovery. So this may present an opportunity to invest at a low price of Bitcoin and then earn good money.

Like the financial markets, Bitcoin and cryptocurrencies also show the UPS and downs. Because of the relative novelty of the phenomena of the blockchain and Bitcoin the cycles of growth and decline is much stronger. So nice to be better informed and to know the factors that affect the price to be able to respond in the best way or even a perfect forecast.

The current rate of coins you can see in our class ranking cryptocurrencies, and in our cryptodata of hontarov and traders you will find lots of other useful information.

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