• Crypto Lists
  • Bitcoin
  • Blockchain
  • Cryptocurrency
  • Altcoin
  • Advertise With Us
  • Join our Telegram Community
Newsletter
ItsBlockchain
  • Bitcoin
    Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

    Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

    Bitcoin ETFs could have the same result as CME group futures launch in 2017

    Bitcoin ETFs could have the same result as CME group futures launch in 2017

    featured image

    How Bitcoin can be hacked?

    keep bitcoin safe

    Keep Your Bitcoins Safe: All You Need to Know About Crypto-Cyberthreats

    featured image

    Bitcoin IRA – Everything You Need to Know

    A trillion dollar tsunami is about to hit Bitcoin

    A trillion dollar tsunami is about to hit Bitcoin

    featured image

    Why Bitcoin will always be the number one cryptocurrency? Explained

    Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

    Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

    On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

    On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

    Trending Tags

    • Crypto Gems
    • NFT
    • DEFI
    • Crypto Lists
    • Altcoin
    • Crypto Market
    • Guide
    • IBC Capital
    No Result
    View All Result
    • Bitcoin
      Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

      Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

      Bitcoin ETFs could have the same result as CME group futures launch in 2017

      Bitcoin ETFs could have the same result as CME group futures launch in 2017

      featured image

      How Bitcoin can be hacked?

      keep bitcoin safe

      Keep Your Bitcoins Safe: All You Need to Know About Crypto-Cyberthreats

      featured image

      Bitcoin IRA – Everything You Need to Know

      A trillion dollar tsunami is about to hit Bitcoin

      A trillion dollar tsunami is about to hit Bitcoin

      featured image

      Why Bitcoin will always be the number one cryptocurrency? Explained

      Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

      Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

      On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

      On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

      Trending Tags

      • Crypto Gems
      • NFT
      • DEFI
      • Crypto Lists
      • Altcoin
      • Crypto Market
      • Guide
      • IBC Capital
      No Result
      View All Result
      ItsBlockchain
      No Result
      View All Result
      Home bitcoin

      What Determines Bitcoin Price

      Hitesh Malviya by Hitesh Malviya
      January 22, 2020
      in bitcoin
      0 0
      0
      bitcoin, bitcoin price
      40
      SHARES
      404
      VIEWS
      Share on FacebookShare on Twitter

      Ever wondered what are the factors which led bitcoin price to such heights? How bitcoin price is determined? Well, we have got answers of all the queries regarding bitcoin’s price.

      Bitcoin price is measured against fiat currency, such as American Dollars (BTCUSD), Chinese Yuan (BTCCNY) or Euro (BTCEUR). Bitcoin therefore appears superficially similar to any symbol traded on foreign exchange market

      Unlike fiat currencies however, there is no official Bitcoin price; only various averages based on price feeds from global exchanges. Bitcoin Average and CoinDesk are two such indices reporting the average price. It’s normal for Bitcoin to trade on any single exchange at a price slightly different to the average.

      But discrepancies aside, what factors determine Bitcoin price?

      Supply and Demand

      The general answer to “why this price?” is “supply and demand.” Price discovery occurs at the meeting point between demand from buyers and supply of sellers. Adapting this model to Bitcoin, it’s clear that the majority of supply is controlled by early adopters and miners.

      Supply

      Inspired by the rarity of gold, Bitcoin was designed to have a fixed supply of 21 million coins, over half of which have already been produced.

      Several early adopters were wise or fortunate enough to earn, buy or mine vast quantities of Bitcoin before it held significant value. The most famous of these is Bitcoin’s creator, Satoshi Nakomoto. Satoshi is thought to hold one million bitcoins or roughly 4.75% of the total supply (of 21 million). If Satoshi were to dump these coins on the market, the ensuing supply glut would collapse the price. The same holds true for any major holder. However, any rational individual seeking to maximise their returns would distribute their sales over time, so as to minimize price impact.

      Miners currently produce around 3,600 bitcoins per day, some portion of which they sell to cover electricity and other business expenses. The daily power cost of all mining is estimated around $500,000. Dividing that total by the current btc to usd price provides an approximation of the minimum number of bitcoins which miners supply to markets daily.

      Demand

      With the current mining reward of 12.5 BTC per block solution, Bitcoin supply is inflating at around 6.25% annually. This rate will drop sharply in 2016, when the next reward halving occurs. That Bitcoin price is rising despite such high inflation (and that it rose in the past when the reward was 50 BTC!) indicates extremely strong demand. Every day, buyers absorb the thousands of coins offered by miners and other sellers.

      A common way to gauge demand from new entrants to the market is to monitor Google trends data (from 2011 to the present) for the search term “Bitcoin.” Such a reflection of public interest tends to correlate strongly with price. High levels of public interest may exaggerate price action; media reports of rising Bitcoin price draw in greedy, uninformed speculators, creating a feedback loop. This typically leads to a bubble shortly followed by a crash. Bitcoin price has experienced at least two such cycles and will likely experience more in future.

      bitcoin price hype cycle itsblockchain

      Drivers of Interest

      Beyond the specialists initially drawn to Bitcoin as a solution to technical, economic and political problems, interest among the general public has historically been stimulated by banking blockades and fiat currency crises.

      Banking Blockades

      Probably the first such instance was the late 2010 WikiLeaks banking blockade, whereby VISA, MasterCard, Western Union and PayPal ceased processing donations to WikiLeaks. Following a request from Satoshi, Julian Assange refrained from accepting Bitcoin until mid-way through 2011. Nevertheless, this event shone a light on Bitcoin’s unique value as censorship resistant electronic money.

      The most recent such blockade occurred when MasterCard and VISA blacklisted Backpage.com , a Craigslist-style site which lists, inter alia, adult services. Adult service providers whose livelihood depends on such advertising have no way to pay for it besides Bitcoin.

      On the subject of business which banks won’t (openly) touch, there’s no avoiding mention of darknet drug markets. While the most (in)famous venue, Silk Road, was taken down, the trade of contraband for bitcoins continues unabated on the darknet. Although only 5% of British users have admitted to purchasing narcotics with Bitcoin, that figure is likely understated for reasons of legal risk. Finally, the media controversy over darknet markets has likely brought Bitcoin to the attention of many who otherwise wouldn’t have encountered it.

      Fiat Currency Crises

      bitcoin price hype cycle itsblockchain

      As discussed our guide, Bitcoin for Bail-in Protection, a Bitcoin wallet can be a lot safer than a bank account. Cypriots learnt this the hard way when their savings were confiscatedin early 2013. This event was reported as causing a price surge, as savers rethought the relative risks of banks versus Bitcoin.

      The next domino to fall was Greece, where strict capital controls were imposed in 2015. Greeks were subjected to a daily withdrawal limit of €60. Bitcoin again demonstrated its value as money without central control.

      Soon after the Greek crisis, China began to devalue the Yuan. As reported at the time, Chinese savers turned to Bitcoin to protect their accumulated wealth.

      china greece bitcoin price

      2015 Bitcoin chart by Tyler Durden of Zero Hedge.

      A current positive influencer of Bitcoin price, or at least perception, is the Argentinian situation. Argentina’s newly-elected President, Mauricio Macri, has pledged to end capital controls. This would eliminate the wide disparity between the official and black-market peso/USD exchange rates. Argentinians who can purchase bitcoin using black-market dollars will likely avoid considerable financial pain.

      bloomberg

      Fake exchange’s volumes

      Market Manipulation

      No discussion of Bitcoin price would be complete without a mention of the role market manipulation plays in adding to price volatility. Bitcoin’s all-time high above $1000 was partly driven by an automated trading algorithms, or “bots,” running on the Mt. Gox exchange. All evidence suggests that these bots were operating fraudulently under the direction of exchange operator, Mark Karpeles, bidding up the price with phantom funds.

      Mt. Gox was the major Bitcoin exchange at the time and the undisputed market leader. Nowadays there are many large exchanges, so a single exchange going bad would not have such an outsize effect on price.

      Major Downside Risks

      It bears repeating that Bitcoin is an experimental project and as such, a highly risky asset. There are many negative influencers of price, chief among them being the legislative risk of a major government banning or strictly regulating Bitcoin businesses. The risk of the Bitcoin network forking along different development paths is also something which could undermine the bitcoin price. Finally, the emergence of a credible competitor, perhaps with the backing of major (central) banks, could see Bitcoin lose market share in future.

      Price Oddities

      Sometimes an exchange’s price may be entirely different from the consensus price, as occurred for a sustained period on Mt. Gox prior to its failure and recently on the Winkelvoss’ Gemini exchange.

      In mid-Novermber 2015, btc to usd hit $2200 on Gemini while trading around $330 on other exchanges. The trades were later reversed. Such events occur occasionally across exchanges, either due to human or software error.

      Bitcoin is ultimately worth what people will buy and sell it for. This is often as much a matter of human psychology as economic calculation. Don’t allow your emotions to dictate your actions in the market; this is best achieved by determining a strategy and sticking to it.

      If your aim is to accumulate Bitcoin, a good method is to set aside a fixed, affordable sum every month to buy bitcoin, no matter the price. Over time, this strategy (known as Dollar-cost averaging), will allow you to accumulate bitcoin at a decent average price without the stress of trying to predict the sometimes wild gyrations of Bitcoin price.

      tag: bitcoin, bitcoin price, btc to usd, bitcoin exchange

      Hitesh Malviya

      Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
      Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.

      IBC-Transparent-Logo-(1)

      Subscribe To Our Newsletter

      Join our mailing list to receive Cryptocurrency investing and trading recommendations to your mailbox.

      You have Successfully Subscribed!

      Tags: bitcoinfeaturedtrading
      Share21Tweet8Share3

      Subscribe to get notified on latest posts.

      Unsubscribe

      Related Posts

      Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

      Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

      by Karthik Guttha
      February 27, 2022
      0

      It has been one hell of a week. The global affairs surrounding Russia and Ukraine have escalated to unexpected levels,...

      Bitcoin ETFs could have the same result as CME group futures launch in 2017

      Bitcoin ETFs could have the same result as CME group futures launch in 2017

      by Karthik Guttha
      October 13, 2021
      0

      The SEC is set to approve five futures exchange-traded funds by the end of October. While the entire market expects...

      featured image

      How Bitcoin can be hacked?

      by Nivesh Rustgi
      August 6, 2021
      0

      In this article, we will discuss how bitcoin can be hacked. Bitcoin runs on blockchain technology, in fact, it...

      keep bitcoin safe

      Keep Your Bitcoins Safe: All You Need to Know About Crypto-Cyberthreats

      by Guest Author
      August 3, 2021
      0

      Keep Your Bitcoins Safe: All You Need to Know About Crypto-Cyberthreats. Cryptocurrencies are an increasingly popular store of value. Banks...

      featured image

      Bitcoin IRA – Everything You Need to Know

      by Nivesh Rustgi
      August 2, 2021
      0

      In this article, We will discuss Bitcoin IRAs, How Bitcoin IRA works, Laws and regulations, Service providers and future of...

      Load More

      About Us

      We curate the best cryptocurrency projects with the intention of adding value for investors through the process of selecting, organizing, and looking after different projects available in the cryptocurrency market.

      • Trending
      • Comments
      • Latest
      Top 5 DeFi Projects on Tezos

      Top 5 DeFi Projects on Tezos

      December 26, 2022
      featured image

      List of leading partners of Ripple, and How they use XRP?

      February 2, 2021
      Trading Tips for Altcoins

      6 Lesser known Trading Tips for Altcoins

      February 17, 2020
      Be warned! Hackers are abusing API keys and stealing your funds

      Be warned! Hackers are abusing API keys and stealing your funds

      June 15, 2021
      Top crypto coins for 2018

      Top 25 crypto coins to Buy in 2018 [UPDATED]

      October 4, 2018
      Crypto Punks, Axie Infinity, and Open Sea have done more than $10.35 billion in sales combined

      Crypto Punks, Axie Infinity, and Open Sea have done more than $10.35 billion in sales combined

      September 26, 2021
      zed run

      A Beginner’s Guide to Zed Run: Digital Horse Racing NFT Game

      August 26, 2021
      Polygon: The Swiss Army Knife of Web3

      Polygon: The Swiss Army Knife of Web3

      May 27, 2023
      Worldcoin: The Biggest Crypto Scam or Innovation?

      Worldcoin: The Biggest Crypto Scam or Innovation?

      May 18, 2023
      EIP-4844 Explained | The Biggest Ethereum Upgrade

      EIP-4844 Explained | The Biggest Ethereum Upgrade

      February 7, 2023
      What Blockchain Can Learn From Barnes & Noble and the Jacksonville Jaguars

      What Blockchain Can Learn From Barnes & Noble and the Jacksonville Jaguars

      January 17, 2023
      RINO Enterprise Wallet launches free Community Edition

      RINO Enterprise Wallet launches free Community Edition

      January 14, 2023
      Top 5 DeFi Projects on Tezos

      Top 5 DeFi Projects on Tezos

      December 26, 2022
      Modular Blockchains: The Next Big Thing in Web3

      Modular Blockchains: The Next Big Thing in Web3

      December 12, 2022
      • Top 10 Cheap Cryptocurrencies with Huge Potential in 2021 | Best Penny Crypto Coins

        Top 10 Cheap Cryptocurrencies with Huge Potential in 2021 | Best Penny Crypto Coins

        29635 shares
        Share 11843 Tweet 7402
      • A Mysterious Bitcoin Whale who sold 3000 Bitcoins at 58K$, Bought back 3521 Bitcoins in the last three days

        9933 shares
        Share 3972 Tweet 2483
      • Top 10 Low market cap altcoins to invest in 2021

        7269 shares
        Share 2906 Tweet 1816
      • Top 10 NFT Crypto Projects You Should Know

        7255 shares
        Share 2623 Tweet 1640
      • List of leading partners of Ripple, and How they use XRP?

        6148 shares
        Share 2459 Tweet 1537
      ItsBlockchain

      We are India’s first and oldest Blockchain & Cryptocurrency publication platform started in 2016. We are a one-stop destination for technical analysis, cryptocurrency recommendations, and Blockchain technology resources.

      Buying Guides

      • Buy Bitcoins in India
      • Buy Bitcoins in China
      • Buy bitcoins in Russia
      • Buy Bitcoins in Japan
      • Buy Bitcoins in Turkey

      Important Links

      • Home
      • About US
      • Privacy Policy
      • Promote Your ICO
      • Submit post

      Follow Us

      Contact us

      support@itsblockchain.com

      © 2020 itsblockchain.com - Designed and maintained by Fanatic Coders

      No Result
      View All Result
      • Bitcoin
      • Crypto Gems
      • NFT
      • DEFI
      • Crypto Lists
      • Altcoin
      • Crypto Market
      • Guide
      • IBC Capital

      © 2020 itsblockchain.com - Designed and maintained by Fanatic Coders

      Login to your account below

      Forgotten Password?

      Fill the forms bellow to register

      All fields are required. Log In

      Retrieve your password

      Please enter your username or email address to reset your password.

      Log In
      This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.