How the bitcoin price is formed
The cryptocurrency market is very volatile. This is one of the distinctive features that attracts the attention of new and new investors to virtual currencies. The issue of pricing mainly interests newcomers to the cryptocurrency market.
To understand The principle of bitcoin price formation or any other currency, we must remember that virtual currencies are not backed by anything tangible and are not regulated by anyone.
Bitcoin price depends on supply and demand
In fact, the price of bitcoin is determined by supply and demand for it. This market law is primary here and is fulfilled for all 100%. The more attention to the cryptocurrency market, the more actively the same bitcoin spreads as an asset or unit of payment, the higher its price.
Digital currencies are as fluid as they are opaque. No one knows exactly how many bitcoins or their counterparts are on the market, or exactly who owns them. This is important, because in such conditions, coordinated actions of several major holders of such an asset (pampers) are enough to reverse the market trend. For high risk, holders of virtual currencies get an opportunity of large-scale earnings - in case the market moves in the "right" direction.
Impact of population literacy
There are also secondary factors that affect the formation of the price of virtual currency. For example, increased financial literacy of people and open access to information about what is happening in the cryptocurrency market. The more attention to digital assets, the greater the demand for bitcoin and other currencies, the higher their prices. Improvements in the cryptocurrency market infrastructure, such as the expansion of deposit methods, transaction paths, conversion options and other options, have a positive effect on increasing investor interest in the market. The easier the "in and out," the better.
Inflation affects indirectly
If you look deeper, there is another driver that affects the rate of virtual currency, but indirectly, not directly. These are indicators of inflation in real life. Bitcoin ratesThe resource is finite because the source code allows us to produce a predetermined amount of bitcoins. This resource is finite because the source code allows us to produce a predetermined amount of bitcoins. Bitcoin, on the other hand, has no reference to inflation (because, again, it is not backed by anything). In this light, investing in cryptocurrency seems increasingly attractive to investors.
Bitcoin and speculators
There can be many less significant influencing factors. These include politics, the number of active buyers and sellers, the amount of money in the cryptocurrency, the mood of speculators, and so on. The influence of the political factor can be easily traced by pairs of bitcoin with currencies of emerging economies - for example, with the Russian ruble.
Speculative players should be mentioned separately. The virtual currency market is just developing, its volume is constantly growing, but intraday indicators still allow for the possibility of artificial formation of a rising or falling trend. As it was said before, a few big holders of cryptocurrency can "collapse" the prices or direct the market into an up-trend.
Panic and hypertrends
Mood is another driver of cryptocurrency prices. "Exchange panic" can both "crash the exchange rate" and "skyrocket" it. It all depends on the reason for market reactions at any given time. If investors are positive and willing to buy, prices will rise.
In any case, when investing in cryptocurrency, it is worth remembering that a successful history of price growth in the past does not guarantee a repeat of this situation in the future. Risks will increase over time as the cryptocurrency market becomes more volatile.