Satoshi Nakamoto is the one that created Bitcoin and launched it to the public in 2009. Bitcoin has a stranger creator/s. No one knows whether it worked as a single person or a group. Blockchain holds every transaction done in this network, showing the history of transactions that will be utilized for proving possession.
Take note that purchasing a bond or stock is different compared to buying a bitcoin, considering that the latter does not work as a corporation. This means that Bitcoin does not have Form 10-Ks or corporate balance sheets that can be reviewed when needed. Aside from that, investing in bitcoin differs from investing in fiat currencies because it is not backed by a central bank or issued by a government. This means that the economic growth measurements, inflation rates, and monetary policy are not applicable in bitcoin.
As you encountered bitcoin in the world of cryptocurrencies and are amazed by its increased price, you might be wondering about the factors affecting its exchange. If so, you are in the right place.
In this post, you will learn the several factors that affect the price of a bitcoin.
The Supply and Demand of Bitcoin
States that do not have fixed foreign exchange rates will adjust the discount rate to control and keep their money from circulating. Aside from adjusting its discount rates, these countries may also engage in an open-market operation or alter their reserve requirements.
Two different factors affect the bitcoin supply in the market. The first one is that the bitcoin protocol enables the creation of new bitcoins with a fixed price. The second one is the number of bitcoins that are allowed by the system to circulate. The highest number of bitcoins that should be mined by the bitcoin miners is only 21 million. After the 21 million bitcoins are mined, mining cannot produce new bitcoins anymore. You can read more about bitcoins here bitcoinboom.app
Competition
Even though bitcoin is considered popular digital money in the world of cryptocurrencies, many different tokens are fighting to get the attention of the market. Even though bitcoin is still at the top of the list in terms of market capitalization, altcoins are some of its closest competitors at the time of writing, such as EIS, LTC (Litecoin), BCH (bitcoin cash, XRP, and ETH (ether). This is beneficial for most crypto investors around the world, considering that close competition promotes low prices. Luckily for bitcoin, it is still at the top of the competition because of its high visibility.
Cost of Production
Even though bitcoins are a virtual digital currency, they do not incur real production costs and can produce products, considering that electricity consumption is an essential aspect by far. Bitcoin mining, a good method to help the bitcoin miners, usually rely on the complicated math problems that miners should solve to earn points. The first miner who can solve the problem gets new bitcoins as a reward.
What makes bitcoin production unique is that its algorithm enables a single block of bitcoin to be found compared to the produced goods. In other words, the more miners joining the competition to solve complex mathematical problems, the more the problem will get difficult. Therefore, the bitcoin price will increase. According to a study, the market price of bitcoin is indeed quite related to the production’s marginal cost.
Availability on Currency Exchanges
The investors of bitcoin are trading the said digital money are using GDAX, Coinbase, and other exchanges. Just like our fiat currency exchanges, the said platforms enable the traders to sell the currency pairs or cryptocurrencies, such as US Dollars or bitcoins.
