Top 5 Factors that Influence Bitcoin Price

You must have seen in the news or heard from friends about the constant changes in Bitcoin prices. The free movement of the price and the decentralization is what has attracted people to the assets.

There’s potential to profit from price changes when trading online with systems like Bitcoin Loophole, or when you buy and sell crypto assets on exchanges.

But the changes also hide a risk for loss. These changes take place because the cryptocurrency has a wide range of influential factors that influence it.

One day it could be low and the next day prices skyrocket to unimaginable heights. When you have a better understanding of these factors, you would be best equipped to cope with them.

The following are the top 5 factors which influence Bitcoin price:

• Demand and supply gimmicks;
• News events;
• Regulations;
• Technological changes – the blockchain;
• Competition.

Let’s dive deeper into each of these factors to learn more. You always need to keep them in the back of your mind in order to successfully apply trading strategies and anticipate price fluctuations.

#1: Demand and supply gimmicks

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The issue of demand and supply takes the center-stage when it comes to Bitcoin prices, just as it influences any other product. As Bitcoin increases in popularity, more people tend to want experience with it and consider Bitcoin trading.

Out of nowhere, you find millions of users globally researching it and making orders. Such a sudden rise in demand is a haven for traders. Because they know you need more of what they have, the BTC traders begin increasing the prices. At the same, a sharp decline in price may also occur.

When that happens, the prices reduce as a way of motivating those who are still willing to buy to get more.

In conjunction with demand, supply is a crucial influential factor. There are two different ways in which Bitcoin supply is impacted. For starters, the protocol of this cryptocurrency is in such a way that it follows a fixed rate.

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The introduction of new BTC to the market happens when miners facilitate a transaction. The rate at which these cryptos are designed to reduce over time. This might trigger a state where Bitcoin demand is increasing much faster with the slowing supplying, consequently impacting prices.

At the same time, supply is also impacted by how much of these coins the system allows to exist. As at the moment, the cap is at 21 million. When this limit is reached, there would be no way to introduce new cryptos. At this point, prices could go up based on the influences of other cryptocurrencies.

#2: News events

Human beings are by nature reactive to situations. Given that the cryptocurrency is highly volatile, the slightest news announcement can either increase or decrease the price. If negative publicity is made, many people will refrain from it as they fear generating losses.

At the same time, positive publicity can result in a sharp rise in prices where many will not want to be left out on the opportunity to cash in.

For example, a news event like allegations of hacking and banning in China or even a prominent figure pronouncing it as fraudulent can make the prices to fall. It is true that Bitcoin still has a smaller market capitalization in comparison to the global economy.

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As such, even the mildest rumor circulating on the Internet can make prices to sharply go in the opposite direction. What remains a fact is that negative news cannot ruin the currency as we can see at the moment. There even some instances in which such news have helped make Bitcoin more popular.

#3: Regulations

The main motivational factor for the sudden emergence of Bitcoin was so that it could do away with regulations. Based on the founder’s design, it was supposed to operate with the influence of a central bank as we see with fiat currency.

Basically, Bitcoin was to be the ultimate democratization of currency. Thus, it is quite ironical that regulators still have an impact on its price decline or increase.

One thing you must know is that even as the crypto increases in popularity, the people who use it are still under governmental leadership. When they see their government taking a soft stance towards the cryptocurrency, they become confident and also cash in.

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For instance, consider the Japanese government which made Bitcoin a legal payment method in 2017. This resulted in high Bitcoin rates. As a matter of fact, this legitimization by the Japanese government is one of the reasons why BTC continues to rise in rates.

There are other countries which haven’t been so considerate on Bitcoin. As these countries ponder on the possibility of regulating the cryptocurrency, users are left worried. The fears take root even when the government makes an announcement which isn’t directly tied to Bitcoin. Under such circumstances, the prices decline.

#4: Competition

Ever since its release in 2009, Bitcoin has remained the single most reputable cryptocurrency. However, this does not mean it operates as a monopoly. As a matter of fact, there are hundreds of other digital currencies.

As at the time of writing this article, we had 1658 cryptocurrencies. Many more are bound to come up.

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There are some very good cryptos like Dogecoin, Ethereum, Litecoin, and Peercoin. This is to say that Bitcoin has a tough competition. If a sizeable number of users choose to buy any of the competitor cryptos, BTC prices decline.

This is actually a good thing for investors since the competition helps ensure prices are kept down. The only advantage that Bitcoin has is that its high visibility ensures it retains competitive advantage.

#5: Technological changes

Bitcoin is powered by blockchain technology. As such, it is logical for technological changes to have an impact on it. There are a couple of technological changes that continue to influence its price.

For example, when Bitcoin was integrated into the PayPal payment system, users all over the world renewed their interest in it. This is so since they saw an even more open opportunity for them to easily convert this into their hаrd cash.

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Other changes such as the launch of numerous initial coin offerings (ICOs) and advances on the blockchain technology to streamline supply have helped Bitcoin increase in prices.

As you have seen, Bitcoin prices are impacted by a wide range of factors. The most impactful of these factors is BTC supply and demand. It may be slow but the changes take place drastically, triggering speculative trading.

All in all, it is a good thing to know that Bitcoin is influenced by certain factors just like fiat currency. It helps assure us that it can seamlessly fit into the global payment system.

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