Bitcoin is a Cryptocurrency that is developed by an unknown person who goes by the name Satoshi Nakamoto. He developed this crypto as a redressal to the Financial Crisis of 2008 that had overtaken the entire globe. So naturally it was born in the year 2009. In this system of transaction, everything is recorded in the Blockchain and the crypto is stored in crypto wallets. Here you get the entire record of all transactions that are made. It is as good as the ledger of a bank.
Also Read: A Guide to Crypto Investments
Factors That Govern the Price of Bitcoin
There are certain factors that control the pricing of Bitcoins. Now, here is a list that you should go through to understand what they are:
- The amount of Bitcoins available in the market and the demand for it
- How much it costs to manufacture each Bitcoin by the process of mining
- How much reward is given to each miner to verify the transactions to the Blockchain
- The cryptocurrencies that are vying for space in the market
- The regulations and rules that control its usage and sale
- The conditions of its internal governing system’
- Development in the news that circulate in the market
Other than these factors, there is another factor that controls the pricing is the absence of a bigger and more authoritative third-party control like that in the traditional system.
The Demand and Supply of Cryptocurrency
It is a general rule that the value of anything is obviously dependent on its demand and supply gap in the market. This is also the case of Bitcoin. Various cryptocurrencies have different supply rates in the market. For example, Bitcoin has its maximum supply limit capped, while Ether has no limit to its supply. The supply of Bitcoin is definitely increased but with a fixed amount in each new block that is created. With a complete differentiation between cryptocurrency hard forks and airdrops you can easily learn these things.
There are some cryptocurrencies that “burn” out their prevailing tokens so that the supply does not become in excess and show signs of fatigue that is reflected in its deflation. When it is burnt, it cannot be recovered again thereby causing the limit in its supply to remain constant.
There are many cryptocurrencies doing the rounds of the crypto market. Thus, there is tough competition, and this is also responsible for their pricing.
Cost of Bitcoin Production Through Mining and The Reward Given to Miners
The process of mining is how new Bitcoins get invented. And that cost of mining is one factor that controls the fluctuation in price of Bitcoins. Here the miners are rewarded for verifying the block just next to it. This reward includes tokens to the miners.
They are also paid an extra fee by the parties exchanging it. The equipment and electricity cost regulates the production cost and ultimately the cost of production of each Bitcoin. If the miners are not reimbursed properly for their efforts, they will not mine the Bitcoins and thus the prices will fluctuate accordingly.
The Various Cryptocurrencies Available in the Market
There are some cryptocurrencies that can be exchanged in any exchange. And there are some cryptocurrencies that can function from one particular exchange only. Their limited availability makes them pricier compared to others. This regulates the pricing of cryptocurrencies. More the exchanges happen, more the demand will be. As Bitcoin can be traded on any exchanges, it is more value about on any exchange its price is higher.
Legalities And Rules
The absence of a governing body is also responsible for its volatility. Since no one actually controls it, the prices are either hiked or made to fall based on the entire system.
Internal Governing System
The community or group that is linked to Bitcoin also has a major role to play in its pricing. The reason is, they themselves are not so very sure of the system, there is confusion which is another reason why they are fluctuating.
The media undoubtedly has huge power in influencing everything under the sun. The hype that is caused influences the price structure of Bitcoins in the market. Positive news that circulates in the media can have positive effect on Bitcoin marketing. So, to remain safe and secure it is always advisable to stay connected with the media.
Bitcoin being a very volatile subject requires a lot of care before treading. Therefore, take care of all the rules and regulations that govern the market and there is no one who can stop you from minting money from Bitcoins.
Note: Don’t Post this content anywhere.