Bitcoin is a type of cryptocurrency that was developed in the year 2009 with the help of a technology called Blockchain technology. In bitcoin, transactions made are recorded in the blocks of the Blockchain as a record of each transaction and as the transactions take place the Blockchain or the bitcoin network keeps spreading. Thus how the cryptocurrency bitcoin works. For more details used this website.
One of the major differences between bitcoin and other traditional currencies is the fact that it is not issued by any government authority or central bank of any country. The concept of purchasing bitcoin is quite different from that of purchasing bonds. Besides, various other factors differentiate bitcoin from traditional stocks, bonds, and fiat currencies.
Although it is an entirely new concept, yet, over the years, bitcoin investment has gained tremendous popularity. With the bitcoin revolution, a new dimension has been added to the financial market on a global scale.
What are the factors responsible for the price determination of bitcoin?
As mentioned, bitcoin is a cryptocurrency, which can’t exist physicallybut can exist only digitally. These currencies are not issued by any government authority or central bank. Therefore, various factors like inflation, monetary policies, etc. which play a major role in influencing the value of a traditional currency are not applicable in the case of bitcoin. Bitcoin is more like an asset that is used to increase the stock value. Certain factors influence bitcoin’s price to change. They are as follows.
- Supply of bitcoin and its market demand.
- Bitcoin is produced through mining procedures. The price of bitcoin depends to a great extent on the cost of mining orthe production process.
- Apart from bitcoin, various other cryptocurrencies are in use. The numbers, demand, and value of these competing cryptocurrencies are also responsible for the price fluctuation of bitcoin.
- Various regulations have been imposed when it comes to the sale and use of bitcoin and they are also important in determining bitcoin’s price.
Over the years, bitcoin has gained the heed of so many retail, online businesses, and institutional foundations. This has increased the demand for bitcoin. Besides, the media is also playing a role in it. It also needs to be mentioned in this regard that the countries suffering from high inflation, have also accepted bitcoin, to act as an alternative for the devalued currencies. Venezuela is one such country. Besides, it has also gained popularity among those who are in the business of transferring a large sum of money for illicit activities.
As the factors that are pointed out above influence the price of bitcoin, it could be said that when it comes to the value of bitcoin is quite unpredictable. Those who are planning to invest in bitcoin need to be prepared to face a volatile market, where the price shoots up and falls at a frequent rate. Despite its volatility, bitcoin has been accepted all over the world. Some countrieshave not yetlegalized the use of bitcoin.However, the fact that billions of dollars are invested to acquire bitcoin goes to show how much popularity has gained over the years.
Things you should know for investing in bitcoin
Are you an experienced trader? Are you aware of the stock market and how it operates? No matter how experienced you are or what your level of expertise is when it comes to bitcoin, it is a different game altogether. It is just because of the nature of the market, which is unpredictable. As a new investor in this domain, you need to learn a lot of things, in terms of its mode of operation, market nature, demand&supply, and various other things. Perhaps, the most important thing that you need to take into consideration is the fact that despite chances of making a profit, you are always vulnerable to a huge amount of loss. Therefore, as a newbie, it is always advisable to gain comprehensive knowledge about the bitcoin market and then go for investment.
Conclusion:
For cryptocurrency, especially bitcoin, 2022 doesn’t seem a good year till now. However, it is bitcoin that has alone kept it moving. According to the experts, within the next 10 years, it can’t be accepted as legal tender by most of the countries in the world.
