Bitcoin or BTC is the most popular cryptocurrency and the first crypto that Satoshi Nakamoto developed in 2009. The creator or creators have used blockchain technology to create this unique concept of cryptocurrency, and since then many new currencies have entered the market. but none can beat the popularity of Bitcoins. For more information about Bitcoin, you can visit this url.
If you download the trading bot, you will get regular suggestions about the buying and selling of different cryptos. Have you wondered how can this bot conclude such suggestions? Well, some factors affect the pricing of Bitcoins.
- Supply of the asset
The first factor that will affect the price of Bitcoin is the supply of crypto. A scarce asset will always have a higher value. But the one available in plenty will always have a lower price.
- All of you know that Bitcoin is very popular. But you also know that crypto has a limited production rate of up to 21 million. As it is impossible to create more than a specific amount every year, the demand will always be higher than the supply.
- The protocol of the creators allows maintaining a fixed rate of the production of BTC every year and the rate will slow down every year.
As the future supply of Bitcoin will decrease, it will add to the demand. The price will skyrocket once the public knows that the resource is limited. And that’s what is happening since 2021, as the graph shows clearly.
- Demand and price
Bitcoin has already drawn the attention of all investors and institutions that are looking for a better alternative to cash transactions. This demand has additional fueling with increased media coverage. The financial experts are iterating how the popularity of BTC has increased even in the countries with high inflation and devaluation of currencies. So the increasing demand and the present prospect of future shrinkage in the number of Bitcoins will together cause a hike in the price of the Bitcoins.
Moreover, Bitcoins have become popular for transferring large sums of money for legal, and sometimes, illegal purposes.
- Production cost
Like all the other commodities, the production cost will play an essential role in determining the price of Bitcoin. The financial investment experts state that the price of Bitcoins mainly depends on the cost of production.
- The production cost of a Bitcoin is the sum of direct fixed expenses for infrastructure and power supply necessary for the mining process and the indirect expense for the difficulty level of the algorithm,
- Bitcoin mining comprises a network of miners who will compete to solve the encrypted number. The first one to solve will win the reward of the newly mined Bitcoin.
In monetary terms, you will need expensive mining machines if someone wants to mine the crypto. Thus, the price will increase as the miners have to put more and more effort into cultivating the crypto.
The release of Bitcoin happened after a major financial crisis owing to slack in the regulations of the derivative market. As the process remains unregulated, it has garnered a great reputation for its regulation-free ecosystem. Although the lack of regulatory status has both advantages and disadvantages, the global reach has increased owing to this structure.
As there is no involvement of third-party organizations in the process, the reach is phenomenal. A decentralized system is good for returns. But If there is the development of any regulatory body, it will bring down the profit percentage to a great extent.
Media and news coverage are essential for controlling the price of the BTC as changes and assumptions become viral, the decision of buying and selling will change on a mass scale. Thus, media coverage will always affect the price.
Now that you know well about the factors that influence the price of BTC, you can judge according to the trends and make better decisions. Expect higher returns once you know how to pick the right time to invest and predict the possible changes in the pricing in the future depending on other factors.