Factors That Could Impact Bitcoins Price
Bitcoin is a unique asset that is relatively new, so the future is generally considered uncertain. While its about a decade old, its still a Wild West type of frontier in many ways, with future regulations uncertain. While its possible the value of bitcoin could surpass $100,000, it could also drop to zero.
The biggest single factor that could impact bitcoins price is likely government action. Regulatory agencies in the U.S. could implement new laws or regulations that severely limit bitcoin or even make it illegal.
When it comes to cryptocurrency regulation, The Federal Trade Commission, The Commodity Futures Trading Association, and the Securities and Exchange Commission are the major government regulators to watch. Because cryptocurrency is not yet regulated, it does not have the same legal or privacy protections as accounts and securities based on the U.S. dollar.
Outside influences can drive bitcoin prices up also. Tesla CEO Elon Musks Tweets, for example, have had an impact on crypto market prices. Catherine Wood, CEO of Ark Invest, is another major Bitcoin advocate who may help lead the market upward. In addition, early investors who built up a significant bitcoin holding, sometimes known as bitcoin whales, can swing the markets by entering a large transaction.
What Is Cryptocurrency Mining
Crypto coin prices mining is the method where transactions between users are checked and added to the blockchain public record. The mining process is additionally liable for bringing new coins into the current flowing supply and is one of the key elements that permit cryptocurrencies to work as a shared decentralized network, without the requirement for a third party central authority.
Rise And Fall Of Cryptocurrency Rates: Volatility Factors
There has been a recent drop in the prices of cryptocurrency prices causing panic amongst crypto traders and investors.
The recent aggressive drop in cryptocurrency prices is being attributed a threat of a cryptocurrency crackdown action by the South Korean government.
The South Korean government has, for a while now, signaled that it plans to crack down on bitcoin and altcoins trading and this has already driven a cryptocurrency sell-off across the market worldwide.
Bitcoin was looking to finally breach the $20,000 mark back in December but has now lost almost a quarter of its value in the past week, trading closer to $11,000 .
Cryptocurrency rates are volatile and could experience a rise or fall of over 10% in a day. Predicting the rise or fall of cryptocurrency often involves guesswork as well as trend research.
The present dip in crypto prices is being attributed to the South Korean governments crackdown threat. However, before we examine this theory, we would be exploring significant factors that affect the prices of cryptocurrency.
Change in Cryptocurrency Rates: Key Factors
The latest drop in cryptocurrency rates can be attributed to more traders selling off than buying cryptocurrencies, and this trend is down to some factors which we would be exploring.
These factors are broken down into:
· Internal factors
The following are internal factors that affect the volatility of the cryptocurrency market:
Forex vs Crypto Volatility
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Bitcoin Prices Fall To Lowest In Months After Us Fed Remarks
Bitcoin prices have fallen to their lowest level in months following remarks from the US Federal Reserve.
The crypto-currency dropped in value from $47,000 earlier this week to less than $42,000 per digital coin.
It follows minutes from a meeting of the Federal Reserve, which suggested it may raise interest rates.
Political events in Kazakhstan have also raised concerns about the network’s capacity.
Because of its global and decentralised nature, attributing a rise or fall in the price of Bitcoin to a single cause is difficult. But many commentators have pointed to the release of the Federal Reserve’s December meeting notes as one factor.
The minutes suggest that America’s central bank might raise interest rates sooner than some had anticipated, and sell off some of its assets.
That could have led to a knock-on effect of traditional investors who hold Bitcoin, as they pursue less risky assets instead.
At the same time, a huge amount of the world’s Bitcoin mining – the process by which transactions are verified and new “coins” made – takes place in Kazakhstan.
The massive Central Asian country has been hit with political unrest this week, as citizens took to the streets to protest against rising fuel prices. Fatal violence followed as demonstrators – which the country’s leaders paint as “rioters” – seized buildings in the largest city, Almaty.
This is what happened:
Government Policies/ Rejection Or Acceptance:
Another factor that sends the prices of cryptocurrency flying high or low is world governments acceptance or rejection.
For instance, Bitcoin value skyrocketed 6% when El Salvador decided to become the first country to adopt the cryptocurrency as legal tender.
Similarly, the US governments Securities and Exchange Commission classifies cryptocurrencies as securities.
Consequently, the SEC tries to approve cryptocurrency-based exchange-traded funds, .
Conversely, a rejection by a government can send the prices crashing.
For instance, cryptocurrency prices, especially Bitcoin price crashed by 20% in May, 2021 with the national ban on cryptocurrency services by Chinese government.
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Who Sets Bitcoins Price
The value of bitcoin is determined by the same market forces that influence the value of any other goods or services. If more people want to buy than sell, prices will likely increase. If there are more sellers, the price tends to fall. This is similar to the stock market, real estate, and most other open marketplaces.
Bitcoin has a fixed maximum supply of 21 million coins, with nearly 19 million coins created. This concept is comparable to outstanding shares in the stock market.
When an open buy order and sell order meet at a common price, the order executes. That final trade price is the current bitcoin value. You can find the most recent bitcoin price using a site like CoinMarketCap or a public blockchain explorer, which is a site that lets anyone review any bitcoin transaction thats ever taken place.
You may find that some exchanges list different bitcoin prices. This is because some exchanges operate independently of the open market and serve only their members, so prices may vary slightly from the overall market. Sometimes this is beneficial because you may be able to buy bitcoin without paying network fees, which may be more than the exchanges fees. Additionally, there is a spread in bitcoin’s price on some exchangesthe difference in the buy and sell pricesthat can make it slightly higher or lower than the market price.
Corporate Bodies And Institutional Adoption/integration:
Recently, corporate bodies and institutions have shown confidence in the value of cryptocurrencies, thereby raising their prices.
For instance, companies are converting their cash treasuries into cryptocurrency.
Examples of such companies are Square and Microstrategy.
Both American companies bought $50 million worth of Bitcoins and converted $425 million worth of cash reserves into Bitcoin, respectively.
These companies, believe cryptocurrency is a better store of value.
Also, Paypal, a global digital payments company, In October 2020, announced the launch of cryptocurrency buying and selling features on its platform.
This wide acceptance and increased integration by even corporate bodies further show confidence in cryptocurrency.
Consequently, more people show interest and the prices rise and vice versa.
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Cost And Amount Of Production:
There are actually around 4,000 cryptocurrencies in circulation.
This is because it is easy to develop a new cryptocurrency.
Developing one crypto coin, in basic terms, is simply computer code generated by open-source software designed to transact value online.
The cost and time of producing a form of cryptocurrency as well as the purpose also determines its value.
Also, the amount of cryptocurrency that the system allows to exist can also affect the price.
For instance, amount of Bitcoin the system allows is 21 million.
So, once production reaches that amount worldwide, mining operations will cease to produce new bitcoins.
This system regulates the supply of the cryptocurrency.
Also, miners use excavators to mine bitcoins and this process is tedious.
Consequently, if the price of extracting virtual currencies increases, it affects the prices too.
What Makes Bitcoin Price Go Up Or Crash Down
While bitcoins wild price movements might seem random, they are often driven by the same fundamental catalysts as in the traditional markets.
Some analysts claim bitcoin is impervious to shocks that affect global finance its a hedge against things like inflation, they claim, and a sure bet against tides of uncertainty. Not so, says the media. There are countless news articles showing bitcoin is affected by exogenous market shocks plus other things that dont touch conventional financial products, such as international regulation and social media.
In this piece, well give you a quick rundown of the main catalysts driving bitcoins price up and down.
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Market Movers That Cause Cryptocurrency Prices To Rise And Fall
What drives people to buy and sell their assets in different markets is a complex discussion. People can be influenced by the market sentiment, news, their own personal circumstances, market analytics, trading signals, etc etc. So lets look with more granularity at 11 factors that can move the crypto market and cause cryptocurrency prices to rise and fall.
What Determines Bitcoins Price
Bitcoin is a cryptocurrency developed in 2009 by Satoshi Nakamoto, the name given to the unknown creator of this virtual currency. Transactions are recorded in a blockchain, which shows the transaction history for each unit and proves ownership.
Unlike investing in traditional currencies, Bitcoin is not issued by a central bank or backed by a government. And buying a bitcoin is different from purchasing a stock or bond, because Bitcoin is not a corporation. Consequently, there are no corporate balance sheets or Form 10-Ks to review.
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Why Does The Price Of Bitcoin Go Up
So when investors lose their confidence in a fiat currency because of economic or political events, they can turn to bitcoin or its rivals, pushing up the price. Some experts believe that cryptocurrencies could replace the ownership of physical gold as a safe haven asset somewhere to turn when the going gets tough.
Will Bitcoins Price Increase
As Bitcoin nears its maximum limit, demand for its cryptocurrency is supposed to increase. The increased demand and limited supply push the price for a single bitcoin higher. Also, more institutions are investing in Bitcoin, stabilizing its markets and making it popular as an investing tool. If bitcoin cryptocurrency becomes popular as a tool for retail transactions, its utility and price will also increase.
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What Causes Cryptocurrency To Rise
Slow mining and hard difficulty cause cryptocurrency prices to rise and fast mining and low difficulty cause cryptocurrency prices to fall. There should be a limited supply with high demand for the value to increase.
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The 2017 Bitcoin Rush
Until 2021, Bitcoins value reached its highest point in January 2017 when it hit $19,498.63. At this point, Bitcoin was one of the most talked about things in the media. Everyone you knew mothers, grandparents, school teachers, and doctors were all asking how high will Bitcoin go?. “Bitcoin price” and “Bitcoin price” predictions were two of the biggest trends on Twitter!
This media attention, or hype, caused Bitcoins price to increase more than it ever had before. It went way, way up. It was crazy! News reporters and financial analysts all made their Bitcoin predictions which made the public interested. More and more people were trying to buy Bitcoin and so the price increased.
Soon after that, Bitcoin Bitcoin’s price crashed.
|Quick note: ATH means All-Time High. It is the highest the price has ever been.|
The question when will Bitcoin crash? had finally been answered. When Bitcoin price prediction started to become smaller and smaller, millions of people were selling their Bitcoin and the price fell to under $10,000.
That’s a significant crash!
It took some time, however, Bitcoin managed to get back up again and in January 2021, its price increased significantly and reached its all-time high of $41,940.
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Understanding What Determines Bitcoins Price
Unlike investing in traditional currencies, Bitcoin is not issued by a central bank or backed by a government therefore, the monetary policy, inflation rates, and economic growth measurements that typically influence the value of currency do not apply to Bitcoin. Conversely, Bitcoin prices are influenced by the following factors:
- The supply of Bitcoin and the markets demand for it
- The cost of producing a bitcoin through the mining process
- The rewards issued to Bitcoin miners for verifying transactions to the blockchain
- The number of competing cryptocurrencies
- Regulations governing its sale and use
- The state of its internal governance
- News developments
What Is The Price Of Bitcoin And Ethereum
The price of Bitcoin was £27,695.18 after the latest drop in prices , according to Coinbase.
Ethereums value is now £1,908.88.
Cryptocurrencies are seen as an alternative to traditional banking methods, cheaper to move money around due to not being regulated by the government or its banks.
The decision by Tesla, and announced by Musk, was seen by some as a slight on the credibility of cryptos to become a viable method of payment against physical currencies.
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Has Bitcoins Bubble Burst
When assets rise very quickly in price, typically this makes a crash much more likely. Or at the very least a correction, when the price falls back down to a more normal level.
That is the situation bitcoin is in right now. Although no one can really say what is a normal level for bitcoin.
It took the cryptocurrency 11 years from launch to get to $20,000 per coin, but only three weeks for bitcoins price to double from there.
A decisive year for currency was in 2013. The Bitcoin price 8 years ago went from $13.40 at the start of the year to its height in December of $1,156.10, before falling to around $760 three days later.
Fast forward to 2020/21 and the price had soared by more than 700% in 12 months.
Where it is heading next is equally unpredictable.
Check out one Times Money Mentor readers crypto experience: Bitcoins rollercoaster ride has swept me to an £8,500 profit in less than a year
Crypto Autumn Not Crypto Winter Says Exchange Boss
When bitcoinâs price fell by half between November and January, several leading market commentators warned that it could be the beginning of a so-called crypto winter.
The latest bounce back means such fears are yet to be realised, with billionaire crypto entrepreneur Sam Bankman-Fried now suggesting it may be a âcrypt autumnâ.
Speaking to Business Insider, the boss of the FTX exchange said there had definitely been a slowdown but there remained plenty of momentum and excitement in the space.
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Founder Of Wawllet Mihail Lalas Whats The Bitcoin Projections In 2021
Its clear that a lot of experts think Bitcoin will do great things this year, but what about the longer term?
Mihail Lala has a Bitcoin prediction in 2021. His Bitcoin projection is that Bitcoin will get to over $100,000 by 2021.Again, thats less than John McAfees $1 million predictions, but its still huge!
We should not ask ourselves, is Bitcoin going to crash?, but when will Bitcoin crash?. This is because when it does crash, we can buy Bitcoin for a much lower price!
What Investors Should Know
If youre investing in cryptocurrency, expect volatility to continue. Thats why experts recommend keeping your crypto investments to less than 5% of your total portfolio.
I know these things are super volatile, like some days they can go down 80%, Humphrey Yang, the personal finance expert behind Humphrey Talks, previously told NextAdvisor. But if you believe in the long-term potential of , just dont check on it. Thats the best thing you can do.
Just like you shouldnt let a price drop influence your decision to buy crypto, dont let a sudden price increase alter your long-term investment strategy. Even more importantly, dont start buying more crypto just because the price is rising. Always make sure your financial bases are covered from your retirement accounts to emergency savings before putting any extra cash into a speculative asset like Bitcoin.
Bitcoins latest big jump also isnt anything new. While in the long-term Bitcoins price has generally gone up, we experience a lot of volatility along the way, says Kiana Danial, founder of Invest Diva.
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Where Do The Analysis Methods Come From
The terms Fundamental and Technical analysis come from options trading philosophies. Using these methods, an investor gathers information in order to inform how they will place trades for assets .
Fundamental analysis involves valuing the company or technology underlying an asset and using that valuation to inform investment decisions. Fundamental analysis requires a lot more understanding of a business and its surrounding dynamics before placing a trade, and usually, trades placed using fundamental analysis are held for the long term.
In crypto investing, fundamental analysis requires understanding market forces, geopolitical and legal dynamics, and of course the underlying technology of a digital currency. Investors using fundamental analysis to decide whether to buy and hold cryptocurrencies are betting that those particular digital currencies will be around for a long time and will yield more value over time. Of course, fundamentals for crypto also include the regulatory environment. We see Bitcoin take a hit each time a new country or entity threatens regulating or taxing crypto.
Technical analysis involves gathering data to observe past results that could be repeated in the future. Technical analysis requires reading charts, looking for patterns, and conducting statistical analyses to determine whether to place a trade, as well as preferable entries and exits.