Bitcoin is the oldest cryptocurrency in the world, and perhaps the most widely recognised. As with all crypto, the market dictates the price of each bitcoin, with fluctuation impacted by several outside factors. Here’s a closer look at some key reasons why bitcoin pricing varies so drastically.
There are far more people interested in bitcoin today than there were ten years ago. In many respects, cryptocurrency has gone mainstream, with bitcoin acknowledged as one of the key players.
This is one of the reasons why the price of bitcoin is prone to fluctuation. Any asset value is determined in part by its demand. An interesting thing to note about bitcoin is that its supply is capped at 21 million. Once this many bitcoins have been created, there will be no more mined.
While this scarcity provides an intrinsic value to the asset, it also helps drive demand and can lead to a sharp rise in the value, particularly as only a fraction of existing bitcoins are traded in the open market.
Bitcoin may be the oldest form of cryptocurrency, but it is by no means the only one. Competition impacts the price of any digital asset, particularly when that crypto has previously capitalised on an open market.
Newer cryptocurrency often faces an uphill struggle to be considered equal to bitcoin, but that doesn’t prevent investors from sometimes switching to the new kid on the block. This in turn has a resultant impact on bitcoin prices.
As a decentralised asset, bitcoin is free from many of the strictures of the financial markets. But that doesn’t mean it is completely freewheeling. Instead, financial regulatory authorities have shown great interest in bitcoin, in the USA and further afield.
A small amount of regulation is a positive step for traders, providing them with more safety during the trading process. However, it can also create a panic in the crypto marketplace, temporarily encouraging lower prices.
Like all cryptocurrencies, bitcoin exists within an inherently volatile market. This impacts the price at which bitcoin can be purchased and traded – for good and bad.
Monitoring the marketplace and knowing when to ‘strike’ (and when to hold back) will help set you up for success.
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