Cryptocurrency is a virtual or digital currency that allows the online selling and purchasing of goods. Bitcoin(BTC), which was the first one created, remains the most popular cryptocurrency today. Bitcoin has become renowned since it’s an inexpensive, secure, and easy way to transact over the internet. These three factors are made possible by the fact that no particular organisation manages the crypto. Instead, every user takes part in its management.
BTC transactions are documented in a digital ledger known as a blockchain. This blockchainhelps document transaction history and also acts as proof of ownership.
What Influences The Value Of Bitcoin Cryptocurrency?
Bitcoin is a decentralised virtual currency. This means that there isn’t a specific organisation or government body that regulates it. Therefore, BTC pricing isn’t affected by government debts or inflation rates. Even so, the bitcoin price keeps changing. So, before buying or selling a unit, be sure to check the current price of Bitcoin.
If it isn’t affected the same way as traditional currencies, what influences the price of Bitcoin units? Below is a list of five factors that dictate the pricing for BTC:
- Supply And Demand
Businesses are affected by the supply and demand of products in the market. In the same way, the laws of supply and demand affect the Bitcoin trade.
Two factors that influence the supply of BTC in the market are:
- Bitcoin Creation Rate
This cryptocurrency is created through Bitcoin mining. As per protocol, a new BTC is created at a fixed rate. When Bitcoin miners process transaction blocks, new bitcoins are launched. The introductory rate for new coins is purposed to reduce as time goes by. This factor creates a situation where the demand goes up while the supply remains low, thereby causing the price to go up.
- Bitcoin Supply Cap
A supply cap is the maximum amount of Bitcoin units that can ever be created. BTC developers designed the supply cap to be 21million. Upon attaining these many units, then no more bitcoin will be created again. At that point, only daily usability and functionality will influence the value of BTC.
The demand for BTC will likely go up once users attain the maximum supply cap. This is because the supply will be limited. Additionally, businesses today have started accepting BTC as a method of payment. This further boosts its usability and increases its price.
- Government Laws On BTC
As the popularity of Bitcoin grows, government institutions are developing interest in it. Some countries have defined it as an asset, while others call it security. Either way, the regulations imposed on this crypto can raise or decrease its price.
Strict laws will decrease the value of BTC. If the regulations are more friendly towards crypto, many people will invest in it, enhancing its growth. The fact that BTC is decentralised means that laws implemented by a government will directly affect the price. If the laws are kind, then growth is likely.
- Bitcoin Competition
Bitcoin is the most popular cryptocurrency. However, there are now many other kinds of cryptos thatcompete with BTC. Some examples are Ethereum, Litecoin, and Polkadot, just to mention a few. These virtual currencies have provided alternatives to investors.
Furthermore, new coins are being developed every time. As a result, BTC traders are now enjoying moderate prices. Even so, Bitcoin still maintains its edge since it’s more visible compared to the rest.
- Media Coverage
Print, visual, audio, or social media channels are the main sources of information for citizens. These play a significant role in educating the public on any issues. Like any media subject, positive press has boosted the popularity of Bitcoin cryptocurrency. This has made it more valuable than other cryptos.
Even today, despite the crypto’s growth, the media’s coverageof BTC could affect its price. Positive information will help improve the value. On the other hand, negative press will make potential buyers shy away from the investment.
- Cost Of Production
Other businesses use raw materials to develop finished products. BTC creation, also known as mining, incurs miners electrical and labour expenses. These two factors are factored into determining the price of the new cryptocurrency.
Bitcoin has become popular over the years. More people are considering investing in it and even using it as a mode of payment in businesses. That being so, the crypto isn’t managed by a regulatory body or authority. Instead, its users manage it. For this reason, factors like inflation or government debts don’t affect the price of Bitcoin.
Some of the factors that regulate the price of BTC are its demand and supply and competition with other virtual currencies. The cost of BTC production could also affect its cost. Also, government laws on BTC and media coverage can dictate the prices of Bitcoin.