Unlike usual assets, bitcoin quote is subject to frequent jumps. On the one hand, this is a great prospect, because if you buy BTC at a low price, you can really increase your investments several times in a couple of months. On the other hand, with the same chance you can depreciate your investments. Therefore, it is important for successful traders to be able to anticipate changes in the value of the cryptocurrency. To do this, an investor needs to understand what factors affect bitcoin pricing, as well as correctly interpret the market situation. It is also important to keep a cool head in any situation. So, how much is a Bitcoin worth?
What affects the bitcoin to dollar exchange rate?
Let’s understand what affects the rate of BTC to USD. According to the canons of economics, if a cryptocurrency has no single regulating center, the value of such an asset depends only on the balance of supply and demand. There are two types of factors that affect this balance: internal and external.
- Limited issuance. Bitcoin software code has a hard limit on the maximum possible number of coins – 21 million units. Blockchain establishes a rule – every 4 years the reward for a found unit is reduced by 2 times, which means that the issue of new coins is slowed down. This is done in order to increase the value of the coin. It should be taken into account that more than 30% of all existing bitcoins are stored in inactive wallets. Practice shows that in 99% of cases access to them is lost forever. It turns out that as bitcoin becomes more popular, there are more people who want to buy it.
- Decentralization. Bitcoin does not have a specific issuer, which is inherent to national currencies. This means that no one can additionally “print” new bitcoins or, on the contrary, “burn” them to somehow influence the exchange rate to another currency. This property of the coin encourages depositors to take BTC as a means of saving their investments in times of financial turmoil. This leads to an increase in the coin’s value.
- Informational. The news background formed by mass media, various online portals, thematic forums influence the traders’ mood, forcing them to either buy or sell this crypto-asset. This is how the trend direction is created.
- Legal. The tightening or, on the contrary, easing of legislation on cryptocurrencies or capital flows in states with strong economies also has a significant impact on the value of the first cryptocurrency. Here we can recall the previous bitcoin rally, which was started by a significant restriction in China on the amount of funds withdrawn from the country in the currency.
- Ecosystem development. It’s simple here. The more goods and services that can be paid for with bitcoin, the more often it is bought. The more often it is bought, the higher its value becomes.
- Whales. Despite the daily turnover of hundreds of billions of dollars, on the scale of the global economy it is a drop in the bucket. It is not a secret for a long time that there are big holders of BTC coins, and they can change the trend to the opposite to please their own economic interests by their actions of selling or buying big amounts of bitcoins.