Unlike putting resources into conventional monetary forms, Bitcoin isn’t given by a national bank or upheld by an administration. Therefore, monetary policy, inflation rates, and economic growth indicators that typically affect the value of any fiat currency do not apply to Bitcoin’s pricing system. If you are interested in Crypto Ninjas Betting Sites, visit this platform regarding bitcoin price determination.
Some Factors For The Determination Of Bitcoin’s Price
Supply, Demand, and Scarcity
Like any other currency, the Bitcoin currency as a whole is subject to the supply and demand process, which is a major economic principle, so if the demand for Bitcoin decreases, its price will fall, and vice versa. If the demand increases, the value of Bitcoin will also increase. In addition, the price of Bitcoin is related to the scarcity factor, which increases the price, which is one of the factors that has led to the highest price of Bitcoin. The maximum production of Bitcoin is limited to 21 million, which is relatively low compared to other digital currencies, while its demand has increased in recent years.
Speculation
Speculation is one of the factors that greatly influences the price of Bitcoin and causes it to rise or fall dramatically. Speculators are eager to make quick profits by trading Bitcoin, so they buy and sell it quickly and frequently, causing its price to fluctuate in the short term. Generally speaking, rapid and strong fluctuations are one of the characteristics of digital currencies.
This characteristic attracts traders’ attention because it creates opportunities to make money through short-term buying and selling, but higher risks inevitably accompany this.
Legalization Development
Some countries still do not recognize the legality of Bitcoin, while others prohibit the use and circulation of this type of currency. Cryptocurrency prices tend to react quickly to any decision on legalization or banning. For example, when Japan announced that Bitcoin would be considered a legal trading tool, its price rose sharply in just 24 hours.
Previously, Japan accounted for only 1% of Bitcoin trading volume. Still, when it decided to legalize cryptocurrency trading, this proportion rose to 6%, reaching 55% of the total global cryptocurrency trading volume within a few days. At the same time, other countries, such as China, took very strict restrictions to prevent Bitcoin transactions, negatively impacting the currency price.
Political Event
In this world, any political event that seems unrelated to cryptocurrency can significantly affect its price. Digital currencies benefit from shaken confidence in official currencies. For example, turmoil in some countries has led people to use digital currencies as an alternative to traditional currencies issued by governments because they are worried that political and economic turmoil in these countries will cause them to suffer material losses, and they have lost confidence in the fiat currencies issued by these governments. These cryptocurrencies are often seen as alternative assets to traditional currencies backed by governments, so when investors lose confidence in their fiat currencies due to economic or political developments, they can turn to Bitcoin, driving up the prices of such currencies.
