5 Things That Are Affecting Bitcoin’s Ups And Down

Bitcoin is the most commonly used Cryptocurrency and its value has not declined since its inception.

Don’t get us wrong.

Its trading price and market value have indeed fluctuated, but it still holds the top rank in the Cryptocurrency market.

Since Bitcoin is not centralized by any particular agency, its trading volume has gone through immense ups and downs over the years. Some of those shifts have been due to inflation, while some have happened due to fear of recession.

Traders at the Quantumai app may be updated about these price shifts beforehand, but that doesn’t negate the fact they don’t suffer the shock and loss.

So, it’s time we find out which factors regulate the price shifts of BTC Cryptocurrency.

Let’s take a look!

1. Governmental Rules & Regulations

Source: omfif.org

Since this is a digital currency, governments throughout the world have failed to grasp this concept comprehensively. If they cannot understand how a currency works, they cannot centralize it with rules and regulations.

However, many countries have legalized Crypto trading, which has been responsible for the unprecedented ups and downs of this digital coin. Regulatory decisions tied to BTC trading have increased its demand and decreased it from time to time.

For example, China planned to shut down different Crypto trading platforms, and that contributed to the price decline of Bitcoin. China has the biggest Crypto trading market, so its government’s decision was bound to have an impact on it.

On the other hand, the Japanese government legalized Cryptocurrency and announced Bitcoin as their official Crypto tender. This movement shot up the price volume significantly over the past few years.

Not only that, but the 2015 Economic Recession in Greece also enabled traders to earn profit. Moreover, the same surge was noticed during the Brexit event and during the election of Donald Trump as the president of the U.S.

It means Bitcoin’s price often goes up and down when the government chooses it as the official currency and when another government dismisses its authority as the legal tender.

2. Supply & Demand

Source: forbes.com

Like any other commodity in the market, price movement also suffers from the same trajectory of supply and demand. When the demand is high, and the supply is low, its price increases, and when the opposite happens, its price volume decreases.

The supply spectrum of BTC can be treated as equivalent to Gold.

Why is Gold so expensive?

It’s because there’s only a certain amount of Gold on Earth, which is why its demand is so high. The more the demand, the higher the price.

Just like that, there’s a limited number of Bitcoins on the decentralized Blockchain platform, and people tend to own most of them before the stock is eradicated.

People need to mine Gold to bring it to the marketplace and fuel our needs. In the same way, people also need to mine Bitcoin to bring it to the Crypto trading platforms and satisfy users.

Now the process of mining Bitcoin is complex. Traders have to solve a series of complex computer problems to bring more BTC on the platform, which enhances the supply.

Depending on the supply and demand, the price volume goes up and down.

3. The Influence Of Media

Source: shoma.news

Media creates hype regarding a certain commodity and intrigues people’s interests.

The influence of the media has been solely responsible for the price movements of Bitcoin because the more people are aware of it, the more they invest in it.

Positive media coverage increases the price while negative media coverage reduces the price volume. For example, when Elon Musk bought $1.5 billion Bitcoin and planned to accept it as an official payment mode to buy Tesla, its price surged overnight.

The same person again decided to stop taking this as a payment option because its mining took too much fuel-generated electricity. He sold almost 10% of the BTC coins and denounced it officially on Twitter, which plummeted Bitcoin’s price in no time.

So, it proves the positive and negative media coverage of Bitcoin is an essential indicator of its price shifts.

4. Crypto Governance

Source: forbes.com

Although Bitcoin is a decentralized currency, it does require some judgments on how it will function and evolve from time to time. These factors also influence the pricing.

To alter the software used to mine and authenticate transactions, developers require the support of more than half of the worldwide network of miners.

Whether we agree or disagree with how Cryptocurrencies are perceived and handled by governments throughout the world, the Crypto business is growing.

Crypto lending’s rise will provide unique chances for Crypto investors and enthusiasts to earn interest, get liquidity, and expand the movements of their Crypto assets.

Due to its decentralized mechanism, it’s not uncommon for Bitcoin to go up by 5% and go down by 10% in the same day. The absence of regulation also means you can trade this coin freely across borders and it is not subjected to the regulations of the derivative market.

5. Production Cost

Source: lawfareblog.com

The direct production costs of creating Bitcoins are other factors that influence their value. We all know that the cost of producing Bitcoins is really expensive.

To mine bitcoins, you’ll need specialized technology that consumes a lot of electricity.

Even though the energy consumed in bitcoin mining appears to be wasteful, it is the only way to secure the consumers’ safety. This is because governments are unable to rapidly shut down the Bitcoin Blockchain.

The number of nodes is another significant indication of Bitcoin value.

To see if a currency is competitively priced, one must look up the node count and total market cap of the coin and compare them to other Cryptocurrencies with similar criteria. This is yet another reason why Bitcoin’s price fluctuates.

The Bottom Line

Bitcoin’s price volume has increased and decreased gradually over the years. However, if you choose to invest in it, you must enter this system for the long term.

Once you understand how the currency performs in the long term, we’re sure you will retain an interest in it.

For further queries, let us know in the comment box below.