What Factors Affect the Value and Price of Bitcoin?
The value of Bitcoin and cryptocurrencies has frequent volatilities. At the start of entering Bitcoin to the market, it has not been defined as a specified value for that, since no one accepted receiving and purchasing it for a given amount of USD. With the beginning of minor trades, a price was gradually determined for newcomer cryptocurrencies. Believe it or not, the initial price and value of Bitcoin was near 6 cents, and it didn’t reach even a dollar until February 2011. From then on the value of Bitcoin began a precipitous surge. Bitcoin price then rose to $1000 little by little; but who or what determines the value of Bitcoin and other cryptocurrencies?
A Collection of Various Factors
Determining the Bitcoin value specifically and exactly is not in the hand of the individuals or agencies, but various factors in the market specify its price orientation. The indices showing Bitcoin price show the results through collecting a variety of information which averages the price of buying and selling Bitcoin at different locations. The value of Bitcoin largely depends on liquidity. There are very extensive volumes of trades carried out daily via important cryptocurrencies such as USD or pound; bitcoin is assumed nothing compared to them.
In such a limited market, every event and accident can influence Bitcoin price dramatically. For example, any news implying a kind of fraud or abuse in cryptocurrencies market will be effective on the price of different cryptocurrencies such as Bitcoin and provoke its volatilities.
Limitation in the Number of Bitcoins
One of the other factors causing turbulence in Bitcoin price and value is the limited number of this cryptocurrency in the world. The Bitcoin which exists in the world is acquired through mining, and this process needs very powerful computers, consuming much electricity and time. Therefore, there is not any Bitcoin mining on a wide and extensive scale. In such a market, distributing Bitcoin has not been conducted similarly and homogenously among those investing in it. Consequently, a number of the people in the cryptocurrencies market are holders of high numbers of Bitcoin and can easily control the market in the way they prefer. There have been such occurrences frequently, and those with higher capitals in the cryptocurrencies market have deterministic hegemony on Bitcoin volatilities.
Before starting any kind of investment, you should well know what will be the risk of losing and decreasing your capital. In the highly volatile market of cryptocurrencies, care and caution are two important pre-requirements. However, be aware that these volatilities cause jeopardizing your capital when it is accompanied with the lack of clear regulations and supervisions on the cryptocurrencies market. So it would be better for the people holding little capital or those seeking for more exploitation from their pension to keep away from Bitcoin trades.