How is Bitcoin's Price Determined?
One of the most asked questions in Bitcoin is how the price of a cryptocurrency, which is not controlled by any center, is determined. The most important difference between bitcoin and fiat currencies is that they are not valued or legally declared by a center. The price of bitcoin changes in line with the supply and demand in cryptocurrency exchanges and varies due to the supply-demand difference in each exchange. It is the demands of the investors that determine the price. In short, if the purchase demand is high, the price increases and if the sales demand is high, the price decreases.
Why Does Bitcoin Price Increase?
In Bitcoin, the increase in demand also triggers an increase in price. Main reasons for the increase in demand:
- The Bitcoin supply is limited to 21 million, which has a significant effect on the Bitcoin price. There are more than 17 million Bitcoins in circulation in the market now, and the remaining supply is expected to be released by miners in more than 120 years. The continuation of Bitcoin's popularity during the completion of the supply process will allow the demand to increase and the price to rise due to the limited supply.
- Technological developments, increase in security, and anonymity will increase the use of Bitcoin and affect its price positively.
- While the governments declared negative opinions to cryptocurrencies in the first periods when Bitcoin came into the market, now the governments have taken their ideas positively by conducting cryptocurrency studies in the central banks, in this case, it will increase the awareness and reliability of Bitcoin and contribute to the increase of demand.
- Another development that causes an increase in Bitcoin demand is that companies start to accept payments as cryptocurrencies, which will make Bitcoin a payment tool.
- It can be shown as the prominence of Bitcoin as an investment tool through reliable exchanges such as ICRYPEX
Why Bitcoin Falls?
Bitcoin also triggers a decrease in price along with a decrease in demand. The main reasons for the decrease in demand are:
Governments ban or restrict cryptocurrencies. For example, the US government's banning of Bitcoin's activities may cause investors all over the world to withdraw and decrease the demand and negatively affect the price of bitcoin.
Global broadcasters spreading negative news, damaging the image of Bitcoin, resulting in investors questioning their trust in Bitcoin and causing a decrease in demand.
There are more than five thousand cryptocurrency assets around the world. This excess in the number of cryptocurrencies may cause the interest in Bitcoin to decrease.
Bitcoin loses its demand as a result of being exposed to technological errors, ecosystem failures, and unfavorable regulations by its developers.
Negative manipulation of investors holding a large amount of Bitcoin.