Bitcoin was developed in 2009 by Satoshi Nakamoto, the name given to the unknown creator or creators of this digital coin. With Bitcoin, transactions are recorded in a blockchain that shows the transaction history for each unit and proves the ownership. Bitcoin is unlike traditional currencies. Buying Bitcoin is different to purchasing bonds or stocks. If you are interested in investing in Bitcoin, then read on to learn more about what impacts its price.
What Determines the Price of Bitcoin?
You can find out more about how much Bitcoin is worth when you Convert Currency at OKX.com. But what influences its price? Bitcoin isn’t backed by a government or issued by a central bank. The typical factors that will influence a currency such as economic growth measurements, inflation rates, and monetary policy do not apply to this cryptocurrency. Instead, Bitcoin acts as more of a commodity that is used to store value. Because of this, the price of Bitcoin is typically affected by the regulations that govern its sale and use, the supply and demand for Bitcoin, the cost of producing Bitcoin through mining, and the news and media coverage of Bitcoin.
How Supply Impacts the Price of Bitcoin
The supply of an asset will have a main role when it comes to determining its price. An asset that is scarce is more likely to have a higher price, while on the other hand, when there are lots available, the price will be lower. There will only be 21 million Bitcoin ever produced, and there is a specific amount created each year. Since the future supply of Bitcoin is dwindling, this is adding to the demand.
Production Costs
Like any other commodity, the cost of producing Bitcoin will also have a key role in determining how much it costs. Bitcoin’s price in cryptocurrency markets is closely related to its cost of production, according to research. When it comes to Bitcoin, the production cost is the sum of the direct fixed costs for the infrastructure and power needed to mine the Bitcoin and an indirect cost that is related to the algorithm’s difficulty level. Bitcoin mining involves a network of miners that compete with one another to solve complex mathematical problems to verify bitcoin transactions in the blockchain.
Competition Impact on Price
While Bitcoin is the most popular and well-known cryptocurrency available, there are now thousands of other cryptocurrencies competing for investments. While Bitcoin continues to dominate cryptocurrency trading, this has decreased over time. This is mainly due to the increased capabilities and awareness of alternative cryptocurrencies. For example, Ethereum is one of the biggest competitors to Bitcoin thanks to the decentralized finance boom over the past few years.
The price of Bitcoin can be very volatile, going up and down all the time. If you are interested in investing in Bitcoin, then it’s important to understand what impacts its price, and what is likely to have an impact on how it moves in either direction.
