Factors that Drive Bitcoin Price on

Let's determine why bitcoin has value. When bitcoin was developed 11 years ago, its creator (or creators), set a final number of bitcoins that can be released ever, and its 21 million.

Factors that Drive Bitcoin Price on

Let's determine why bitcoin has value. When bitcoin was developed 11 years ago, its creator (or creators), set a final number of bitcoins that can be released ever, and it's 21 million.  The current supply of bitcoin now is nearly 18 million, and according to calculations, it will pass 19 million in 2022. Besides, the last Bitcoin is not planned to be mined until 2140. Here we have a shortage of supply, which gives bitcoin precious value.

The second reason why bitcoin is so valuable is its divisibility. Bitcoin can be divided up to 8 decimal points, where the smallest unit identifies 0.00000001 Bitcoin. While the U.S. dollar breaks into only 1/100 of 1 USD.

One of the most valuable elements of bitcoin is its endurance. While endurance is the biggest problem for fiat currencies, for instance, a physical dollar can still be torn or burned, bitcoin is extremely durable. It also cannot be lost. Even in case, a bitcoin holder loses a cryptographic key, the bitcoin itself will not be consumed but will continue its existence in the blockchain records.

But what forms the price of bitcoin as a digital currency?

  1.     Supply and Demand

As we said in the beginning, the supply of bitcoin makes it one of the most valuable assets.  The same way supply and demand drive its price higher and higher. As the world knows the total quantity of Gold on Earth, the supply of bitcoin is a predetermined maximum number of bitcoins that can be mined.

The demand for bitcoin works on the same level as for Gold and other valuable assets. The more new investors enter the cryptocurrency market, the higher the bitcoin price will boost.

  1.     Government regulations

Although bitcoin is a decentralized digital currency, the regulation of the government has a tremendous impact on bitcoin investors, as it influences the whole system. Any fear of new government restrictions on bitcoin will immediately lower the price, and the opposite, positive decisions from central authorities will increase the price.

As bitcoin is relevantly a new currency, it’s hard for some governments to adopt it. If we come back to 2017 when China's central government banned several crypto exchanges, the price of bitcoin dropped excessively by 29% in just 24 hours.

  1.     Media influence

As various researches show, the greatest impact on bitcoin price comes from the media. Media attracts new investors and brings more people to cryptocurrencies. Social networks have great power to spread the news, leading bitcoin to higher prices.

Let’s take the elementary case when some global leading company that announced a very strong interest in accepting bitcoin as a form of payment, and its intentions to test bitcoin in real conditions soon. This simple interest of intent will increase the price of bitcoin in just a few hours. Because reading this news, many investors will consider that bitcoin is legitimized since a dominant announces the support of bitcoin. This news will inspire them to invest in bitcoin.

If the supply of bitcoin is fixed and demand is increasing, it makes the price increase. Amidst social networks, news, and regulation from central governments play a significant role in driving the demand for bitcoin up.