How and Who Determines the Price of Bitcoin

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Today’s price of Bitcoin is a little less than $62,000 and a few days ago it reached another historical value of $63,500 and something more, becoming the first cryptocurrency to hit that rate. Many investors and traders are now sure they made the right choice when they decided to invest in this currency. You probably know these things, but we can always remind you that it’s a decentralized currency, different from traditional money, and the number of coins available is very high, but also, very limited. That’s one of the things that can define the price, but there are many other factors included.

For example, the economic principles are the same. Supply and demand are some of the factors that influence the price, then the cost of the mining process, the power of the other cryptocurrencies, the exchanges, and internal regulations. According to some sources, at the end of the last year, almost 90% of the total supply was already mined, which means there is a limited number of coins left in the blockchain, which explains the high price and huge demand.

As you can see on www.foreign-trade.com, BTC’s price is volatile because of the liquidity too. But, this currency is a cult by itself, and people want it more and more, and sometimes, a tiny event, like the spike of some other coin can change the whole market. Also, every intention to regulate cryptocurrencies by the authorities can also result in price changes.

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Another example that had an influence over the price was the current pandemic. We all remember that last year in March and April the prices dropped, as a result of the global economic collapse. But, after the halving in May, which is also an important event on this market, the rates were more stable for months, until the end of 2020, when they started to grow rapidly. Some experts say this trend will continue, but others aren’t that optimistic. There are many scenarios for BTC disappearance, but that won’t happen soon, even though there is always a possibility for the prices to drop over the night.

So, there is no one person there that controls the prices, but a combination of different people, the demand, the power-consuming process, and the general supply are the factors that can change BTC’s rates.

All the factors that can make a change

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The market is the one that defines all the prices – not just Bitcoin’s. Also, it’s expected that they will vary, knowing that it can be located everywhere. There is no magical box full of coins that can be found on a map. Bitcoins can’t be a part of the treasure hunting plan. At the same moment, people from different countries can mine and transfer the coins, so it’s available everywhere. The information where these exchanges are based is also a key factor in the price. There is no stable moment because every minute it raises or drops for a few dollars or more.

Another factor is the number of Bitcoins that are transferred through the blockchain and other platforms at the very same moment. Now, people who had some savings, are looking for a nice exchange, and there are a lot of them – which gives the coin enough freedom to grow rapidly. It’s a stream that can’t be controlled with woods and rocks, and it’s not simple to take control over the blockchain.

If we compare the fiat and crypto markets, we will see that during one day, large amounts of fiat money are traded and exchanged for goods or other currencies. But, it’s not the same with cryptocurrencies. Sometimes a small portion of BTC is exchanged because even a half of Bitcoin has a huge value right now. That’s why small events have a huge influence on the price. As we said, if some government tries to take control over it, the price will drop anyway, because that’s not the point of cryptocurrencies. Once in the past, China’s authorities tried to do that, but the price dropped rapidly and there was no reason to continue with that activity. In the end, it resulted in large limitations and restrictions, even though the founder is a Chinese man known as Satoshi Nakamoto (it’s not his real name, and no one knows how he looks like or is he man or woman too).

But, why they have value at all?

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All the currencies are invented to be valuable, and as time goes by, they are progressing and developing, or stay stable. In the past, a lot of things were used as currencies, including metal pieces, food, oils, and other goods used for trading and payments. After that, money was invented, and knowing all the situations with the economy, and the tech development too, the need for something virtual appeared by itself. So, here we are, having plenty of cryptocurrencies, even though just a few of them are really attractive. But, when something is considered as a worthy asset, it has a value that is defined by the factors we mentioned previously.

There are a few qualities that have to be met. The maintenance of the global supply of the money available, so there is no inflation. Also, divisibility is an important thing too, because even the dollar has cents, and the British pound has pennies. People can invest in smaller portions of Bitcoins, that can be used for different types of goods and services. Also, the transactions are easy and quick, and that’s one of the factors that can influence the overall price of any currency, not just the crypto market.

Everything around us has value. Right now, the prices of the oil are going up, because the supplies are limited, and the raw materials for production are more expensive. We can compare the crypto market with any other market so we can understand it better. When the demand is high, but the supplies limited, the price is even higher, no matter if we talk about Bitcoins, vegetables, oil, milk, or any other good we need to live comfortably.

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