No wonder if the bitcoin price exceeds $ 100,000 at the end of 2021, as investments in bitcoin are surging from all over the world at an increasing scale. Besides the fact, that still several countries have not officially declared bitcoin as a legal tender, the number of bitcoin users is rising at an enormous speed.
Bitcoin’s price volatility history is full of surprises and opportunities. Not only bitcoin but, the popularity of blockchain is also grasping roots in the financial transactions ecosystem. According to the recent crypto stats, the blockchain market is expected to cross $ 23 billion by the end of 2023. The amazing fact about bitcoin price is that it recovers, no matter how long it takes. The past trends from 2017 onwards show how volatile the bitcoin market has been over the last 4 years.
The emergence of AI-powered online trading platforms and apps has made it easier for traders and investors to jump into the market at the right time. Apps like the “bitqs app” are the best example of such platforms that provide AI-systems support to facilitate trading. There are several factors that determine the bitcoin price volatility. This article would enable you to go through some of the important ones.
Demand and supply mechanism
Bitcoin is not unlimited, the scarce nature of bitcoin makes it unique, special, and valuable. There are approximately 21 million bitcoins out of which more than 18 million bitcoin has been mined. Bitcoin came into existence after the mining process. Bitcoin miners use chips and high-intensity computers to solve mathematical complex problems, in order to mine the bitcoin. GPU and ASIC are the main components used in mining bitcoin. As more miners are entering into the bitcoin mining business, the number of bitcoins left to be produced is reducing in number.
Bitcoin scarcity escalates the demand for bitcoin more bitcoins being mined more scarce and valuable it becomes. As the numbers of miners increase the demand also increase and as demand rises bitcoin price would be affected in a positive way.
The role of media in boosting up the bitcoin price is essential. Media coverage attracts more people towards the virtual currency market, which indirectly impacts the bitcoin price. According to multiple studies, bitcoin price is heavily influenced by effective media coverage.
The influence of news and media on bitcoin depends on the negative and positive elements, if the media shows benefits of trading and holding bitcoin the price normally goes up, and on the other side if negativity is spread against the bitcoin its price falls.
There are many investors who consider news, media updates, and expert views before investing in a venture. Hence if the feedback from news and social media platforms is in favor of bitcoin, then investments are more likely to increase. The media coverage influences retail investors the most.
Change in regulations by governments
Most of the developed economies like Japan, the US, and the UK have legalized bitcoin. For example, in 2020 the UK government officially declared crypto assets as legal property, which positively contributed to bitcoin price.
Recently, China had a very harsh stance against crypto in 2017, when all the financial institutes were prohibited to deal with any sort of crypto-related activities. The ban on ICOs made it clear that it’s not a good decision in favor of bitcoin, and hence its price was negatively affected by the government regulation.
Political events that lead to the depreciation of the nation’s currency also affect the price of bitcoin. When lack of economic progress fails to achieve the confidence of the people, cryptocurrencies work as an alternative to their native currency and people start to attract to digital currencies like bitcoin. The relation between countries also impacts the bitcoin price, like the US vs China trade war.
There are more than 40 million digital currency users, and most of them are involved in bitcoin. There are few other relevant factors as well like a number of competing cryptocurrencies and the cost of production that determine bitcoin price. Bitcoin has been exceptionally unpredictable since its existence, and it would not be wrong to conclude that its uncertainty is the key factor that makes bitcoin a unique virtual currency.