5 Factors Affecting that Bitcoin Price Up and Down

Volatility impacts the value of cryptocurrency. Sometimes, Bitcoin suddenly hikes or hits lower points which shocks the entire crypto community. Bitcoin Loophole are exchanged via a peer-to-peer network and are heavily encrypted before storing them in a blockchain ledger. Although, this decentralized cryptocurrency is not regulated by any organization, government, and financial institution. 

5 Factors Affecting that Bitcoin Price Up and Down
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But still, you can see price fluctuation in the crypto market. Investors and traders get shocked to see the sudden bitcoin price movement. It makes them wonder how the BTC can play with its value. This post will share key factors that influence the price of Bitcoin. 

5 Factors Affecting Price Up and Down

1. Cost of production

Bitcoin is a digital currency whose production cost is decided based on the bitcoin mining process. In this mining process, miners can produce BTC by solving cryptographic math problems and get rewarded with a newly-minted BTC. This math-solving process requires a continuous supply of power. Thus the charge of electrical consumption will be added to the value of bitcoin. 

Besides, if more miners join the process of bitcoin mining, it will increase the competition. Also, increase production cost, and so does the bitcoin price.

2. Rules and Regulations

There is a long debate going on how to classify bitcoin. It is still a new asset to adopt and also makes it tough to specify regulations for the governments. If the Governmet passes a decision or makes strict rules, it could cause bitcoins prices to drop.  

Cryptocurrency regulations have picked up the pace. Countries like India, the USA and Australia have introduced regulations to regulate the cryptocurrency market. The objective is to make the crypto market more stable and invite more investors to become a part of this domain. For example, in India, there is also a flat 30% tax on profits from bitcoin transactions. A TDS of 1% is imposed. Therefore, the value of crypto is crashing down, and investors have recounted a horrifying experience. On the other hand, if the government's regulations are in favour of the crypto industry, they can act as a catalyst for rapid growth.

3. Supply and Demand

The same as the stock market, demand and supply is the most important factor in driving Bitcoin price’s up and down. It follows the same concept of demand and supply, which is:

The higher the price, the lower the demand for bitcoin.

The higher the price, the seller will sell more of a good. 

Both demand and supply work together to decide the market price and volume of the product. 

You may not know that Bitcoin is created at a fixed rate. So, when miners verify a block of transactions, a new bitcoin is introduced to the market. This process is getting slow over time. It can lead to more demand for the BTC than supply. In this case, the price of bitcoin also rises.  

Also, the BTC market cap is only 21 million. Once this market cap is reached, miners will not be rewarded with bitcoins. But, the reduction in bitcoin supply will not impact its value. Instead, the efficiency and usability of bitcoin will determine the price of BTC.

5. Media Power

Media plays the biggest role in the bitcoin price movement. So, it also affects the bitcoin price. Also, the study suggests that positive news about cryptocurrencies is also a factor in a sudden hike in bitcoin prices. In contrast, any negative media coverage can affect the value of bitcoin. 

In general, media help investors and people to understand the efficiency of bitcoin and lead more people to buy bitcoins. If you find an article on how Ethereum is gaining popularity and why it is best to trade Ethereum than bitcoin, you feel enlightened and attracted to invest. That is the power of media, where you feel the FOMO (fear of missing out) and buy Bitcoin right away. 

The Bottom Line

Investors must consider all these factors while engaging in bitcoin transactions. Therefore, It is essential to understand that bitcoins are highly volatile and still maturing before investing in them. The best thing you can do is to gain more information and explore other assets, such as Ethereum. Investing in bitcoin is a big decision, so make sure you make an informed one that will benefit you and not lose you money.  

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