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Unless you have been living with your head in the sand, there is a good chance that you are at least peripherally aware of Bitcoin and cryptocurrencies, in general. Bitcoin has become one of the most talked-about and volatile coins in the world.
Though we know that prices rise to tremendous heights and suffer through major falls, what actually impacts the overall price of Bitcoin? There are a few determining factors that have an influence on prices at the end of the day.
Supply and Demand
Bitcoin price is not necessarily unique when you consider the factors that influence it. For starters, it is heavily impacted by supply and demand just as any other form of investment would be. The more in-demand Bitcoin is, the hotter it can get. We have seen that in some of the major rises in price that we have seen so far.
Part of the demand has to do with cryptocurrency technology, in general. As the demand for digital currency continues to go up, the price of Bitcoin (and other cryptocurrencies) goes up by comparison. Should there be a waning in the demand for Bitcoin, cryptocurrency as a whole will suffer.
Mining and Halving
Rarity is a factor with any investment. Part of what provides demand for Bitcoin is its 21-million-coin cap. Knowing that there is a finite number of coins is a selling point for some investors. Miners are able to mine new coins, but that is an expensive process that has been getting tougher with each passing year.
Each halving event happens roughly every four years. Not only that, but it also reduces the overall number of new coins entering the market by a whopping 50%. That increasing rarity is another major reason why Bitcoin will likely only continue to appreciate moving forward.
Public Opinion
As we have seen several times so far, public opinion and the right amount of hype can have a major impact. We have seen huge investors like Elon Musk pWhat Factors Impact the Price of Bitcoin?ut out hype for Bitcoin or another kind of cryptocurrency only to see prices shoot up for at least a short-term basis. Any kind of positive news can impact the price of Bitcoin for the better.
Things like further implementation of Bitcoin as a payment method, as well as adoptions by larger companies or developments in favorable regulatory news, can also lead to a price hike. When something negative happens – like a security breach – it can cause major investors to sell off in bulk, which can lead to a downturn in price.
Emotional Investing
Emotions wind up coming into play when talking about investing. While it would be nice to be able to approach investing with a clear mind, far too many investors will panic depending on the movement of the market. Fear and greed are strong emotions and can lead to major shifts in the total price of Bitcoin.
When the market is optimistic, buyers may snap up more Bitcoin. That can lead prices to climb. When the market is more fearful, investors sell off in bulk, which can lead to a major drop in prices. As an investor of Bitcoin and other cryptocurrencies, it is critical to hold pat and ride the waves. Then again, you could go the opposite way and become a crypto day trader, which involves trying to find the right peaks and valleys in which to act.
There are other factors when it comes to buying and selling cryptocurrencies. Bitcoin continues to set the pace, creating one of the most volatile investment opportunities you will find.
