The appearance of Bitcoins has given rise to bias and criticism of the traditional financial system and its comparison to the new era of digital money. What interests investors most of all is the time when Bitcoin rises again, but it gets more complicated to adjust to the weighty influencing factors for Bitcoin’s price. The traditional currencies fall under monetary policy, economic changes and inflation rates, but the value of Bitcoin has nothing to do with all these measurements as the independent currency belongs to people only, not the state. Let’s take a look more closely at the factors that do influence Bitcoin’s price.
Factors Affecting Bitcoin Cost:
The first factor is the supply of the digital currency and market demand for it. What affects the supply of Bitcoin is the generation of new coins at a fixed rate, in other words, it is the whole mining process. If the demand for Bitcoins increases faster than the supply, it can raise the price. Then supply falls under the influence of the maximum and total amount of Bitcoins that can ever exist. That is 21 million and when all of them are in circulation, prices will depend on its popularity, usability in transactions and legacy.
Among significant factors, analysts determine the game of whales, i.e. big players. Provided that they are ready to buy Bitcoins on the market, the rate will constantly grow. Whales have large assets and are able to purchase huge amounts of coins and thus drive up the rate to higher values.
However, the last ones often hide behind good news invented by themselves. Certainly, advertisement in the media and the juicy digital news contribute to the growth or fall of Bitcoin. The great advantage is that it takes the leading place on the market and the widespread competition among other cryptocurrencies do not reach Father Bitcoin.
In 2019 three recent increases in the complexity of the Bitcoin network preceded a rise in the price. The crypto enthusiasts are explaining reasons for such a co-relation or a possible coincidence. The complexity and hashrate might rise after its price because more and more users get involved into mining.
Another hypothesis is that there exists a certain formula to be counted after learning the value of Bitcoin and the changes in the complexity of its generating; any way a certain correlation must exist. Bitcoin’s algorithm mines a block on average ten minutes. The more miners join the competition, the more difficult the task becomes, and consequently Bitcoin becomes more expensive.
Bitcoins are traded for real currency and have exchange value. Coinbase and GDAX are the most reliable exchanges for crypto investors. They allow trading cryptocurrency pairs and attract participants by its popularity. The Bitcoin’s rate is affected by the activity of participants on the exchange. However, speculators can also trigger processes of ups and downs, and all other exchanges follow them, which causes fluctuations in the exchange rate.
When there was a little demand for cryptocurrencies the slow transaction speed was not a problem. It is slow because of the amount of transactions taking place and design; Bitcoin processes approximately three transactions per second. To compare Visa does around 1700 transactions per second.
Crypto fans worry that the slow transaction speed can drive investors to other competitive cryptocurrencies that might crucially affect the price of Father Bitcoin. However, Bitcoin is a free coin without any host, but it relies on developers and miners who are to keep the blockchain robust. Bitcoin will exist until its huge family of followers believes in it.