Both Bitcoin buyers and sellers attention on the market is always focused on the cryptocurrency price. This is a defining factor that empowers traders to makes decisions on whether to buy or sell Bitcoins. Every day, experts make forecasts about the price based on fundamental or technical analysis and market players are closely following any news that may affect the price and value of Bitcoin. In this article we will try to understand what factors affect the growth or decline of Bitcoin price rates. But first, let us recall what represents the price of Bitcoin.
Bitcoin has value for several reasons:
- Bitcoin is money and an alternative to fiat money. Bitcoin has all the features that are inherent in money - it is divisible, durable, recognizable and most importantly, it is accepted as a payment. Unlike fiat money or gold, Bitcoin has no physical embodiments and is not backed by physical items but rather it has a mathematical and technical basis.
- People trust in this currency and this trust is increasing.
- Bitcoin is already a common means of payment among its users, and its acceptance ia spreading fast too.
- The cost of Bitcoin is determined by its users, and only by them.
Factors that affect the price
Now let's try to find out what factors affect the growth of the Bitcoin price. The price of any currency or commodity, as it is known, is determined by supply and demand.
The first factor that affects the price of Bitcoin, in our opinion, is its limitations, both in quantity and in production time. The total number of Bitcoins has long been known – only 21 million. Thus, the time at which newly created or mined Bitcoins will be available is predictable, and the production rate is decreasing. This factor has a positive impact on Bitcoin and contributes to its growth.
The second factor is the belief in the price of Bitcoin rising to unlimited levels: $ 10,000, $ 1,000,000 and above.
The third factor is the use of Bitcoin as a payment system to transfer money from one point to another.
The fourth factor is the trust of the people. In recent years, more and more people are interested in cryptocurrency and tend to buy it. More and more companies and merchants accept Bitcoin as a means of payment. This factor also contributes to the growth of Bitcoin.
The fifth factor is the recognition of Bitcoin as a means of payment and investment in it by different governments. As well as growing legal acceptance, regulation and the acquiring of official status in countries worldwide.
The sixth factor contributing to the strengthening of Bitcoin’s price is its independence from the macroeconomic indicators of the leading countries of the world. Their national currencies are fluctuating due to the quality of state statistics, but such news has almost no effect on the Bitcoin price.
Now let us consider the factors that actually do affect the price of Bitсoin and may contribute to its decrease. We all know that there is no absolutely reliable currency in the world. So why are we witnessing periodic Bitcoin price decline in the market?
- Bitcoin is the the same financial instrument on the currency marketthere all other currencies, stocks, bonds, etc. In other words, it is a commodity that has always been sold and bought. Since the advent of Bitcoin it has proven to be reliable, but that does not change its exposure to fluctuations that are inherent in the foreign exchange market. Bitcoin price fluctuations may be caused by searches for the optimal price that are done between buyers and sellers.
- Handling Bitcoin exchanges is limited and does not require large amounts of money so it has no major influence on the Bitcoin price. It is enough for one buyer to purchase a large number of Bitcoins to make the market react instantly by increasing prices. Or, conversely, a large volume of sold Bitcoins will cause a sharp decline in its price.
- Change in the price of Bitcoin depends on credibility from the people. Any negative information about Bitcoin could trigger a sharp decline in its price.
- Bitcoin has many other competitors from the cryptocurrency family. These cryptocurrency’s success on the stock exchange and the growth of their value could affect the price of Bitcoin.
We asked Ivan Tello from Argentina. He is a technical analyst specializing in the Elliott Wave Principle at ruartereports.com. He replied as follows:
“The price of Bitcoin is seesawed by human psychology, by people who believe that in the future it will be worth more or that the morning news will affect it negatively.
The price goes up and down because of an ongoing struggle between two tireless forces, the bulls and the bears. People who need the price to climb to win versus people who need it to come down to win, people who believe that Bitcoin is cheap or expensive. Technical analysis does not explain, nor study, nor analyze the reasons why the price goes up or down, that is what journalists do, they attach a name, a title, so people can understand the reasons why the price fluctuates, but basically they do not know why it increased or decreased, or if news leaked before it was published.
They are players that move the price based on your needs and your psychology. These actions do leave marks and those marks are studied by technical analysts, who operate on the tracks left.
People who think that oil rises because it is a scarce commodity or that gold rises because the oil will disappear in a moment, they are people who do not add anything to the market.
The price goes up because it should be up and down because it should be down. Psychology of the masses.”
The question of Bitcoin price changes will always be the focus of investors and ordinary people. What other factors affect the price of Bitcoin? This question remains open.
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