Bitcoin Value – What Affects BTC Price

The term “price”, as used here, shouldn’t be confused with the “value” that is a perceived relationship of the benefits and the utility of Bitcoin. The Bitcoin price is expressed as an exchange rate in relation to another currency. So, for example, the exchange rate of Bitcoin to Dollar can be $ 1,750 for a bitcoin, written as $ 1,750 BTC / USD.

How to Buy Bitcoin Online?

It is easy, safe and fast.

Simply:

  1. Create an account at Coinbase or Binance.
  2. Confirm your identity by uploading the requested documents (photo of passport, for instance).
  3. Add a payment method. For example credit card or bank transfer.
  4. Choose which cryptocurrency you are buying. (E.g. Bitcoin, Ethereum, Ripple, DASH, EOS, ADA, BNB, NEO or VET)
  5. Choose how much crypto you are byuing.
  6. Confirm the purchase.

Bitcoin has been designed to create a total of 21 million bitcoins for more than 100 years, according to a logarithmic release function. At the time of writing this article, there are just over 13 million bitcoins in circulation, which means another 8 million bitcoins will be extracted in the next 95 years. Given this time scale and the deceleration rate of the monetary base increase, it is assumed that the supply of bitcoin can, for practical purposes, be constant.

With a greater use and greater adoption of Bitcoin, the bitcoins demand will always be increasing. With a constant supply and growing demand, the only factor in the equation that can change is the bitcoin price, in particular, it would go up. Therefore, in the supposed increase in demand, the Bitcoin price increases gradually in the long term and if that demand isn’t met, it can be worth nothing as well.

The Varied Functions of Bitcoin

Bitcoin has many functions and uses, but in this analysis, only those that affect price fluctuations will be taken into account:

  1. Bitcoin payment network: Bitcoin as currency.
  2. Storage and Transfer of Bitcoin: Bitcoin as a wealth reserve and means of transmission of value.
  3. Bitcoin Exchange Rate: Bitcoin as a market and wildcard instrument.

Bitcoin Payment Network

Transactions in Bitcoin are made permanent and throughout the day. At the time of writing this article, an average of 62,000 Bitcoin transactions is carried out every day with an average volume of $ 50,000 per day.

Of course, transactions in the Bitcoin network don’t directly affect Bitcoin’s market price. In the sense that an active Bitcoin network reflects a healthy protocol that enjoys a variety of use and demand, there is an indirect influence. Only when the Bitcoin interface with other currencies – in the exchange houses – there is a direct impact on the price of Bitcoin.

Bitcoins Purchase

Each bitcoin exchange transaction involving the purchase of bitcoins through another currency, whether it is money (dollars, euros, etc.) or cryptocurrency, has the effect of pushing up the price of Bitcoin. Because bitcoins are changing hands – from the purse of the exchange house to the purse of the buyer – there is an associated transaction in the Bitcoin network. However, it is the exchange transaction that is taken into account for an increase in the Bitcoin exchange rate.

Bitcoins Sale

Each exchange transaction involving the bitcoins sale, that is, exchange to fiat or to another cryptocurrency, has the downward pressure effect of the Bitcoin price. Let’s analyze the aforementioned example of the use of the Bitcoin network as a means of transmitting money.

The first bitcoins purchase would have caused a rebound (however small) in the USD / BTC exchange rate. Half an hour later, the sale of bitcoins to the local currency of Zambia will cause a drop in the BTC / ZMK exchange rate. Here are some of Bitcoin’s routine sales that put downward pressure on the Bitcoin exchange price:

  • Merchants that accept Bitcoin.
  • The reimbursements of miners to pay bills and expenses with fiat money.
  • Redemption of bitcoin transmission (explained above).
  • Partial or total conversion of salaries in bitcoin to fiat.

It is often stated that merchants who accept Bitcoin payments convert all bitcoins that they receive directly to money to avoid volatile intraday changes in Bitcoin prices. This seems like a shared strategy, although it should be noted that there is no financial policy that applies to all companies.

It may be the case that some companies receive astute investment advice and decide to own amounts in Bitcoin or channel them to investment funds. This would have the same effect as Bitcoin’s long-term storage.

In the event that merchants convert the received bitcoin directly to money, there would, in fact, be downward pressure on prices. However, it is balanced by the upward pressure caused by consumers (or by employers who pay in bitcoins) who buy bitcoin in order to make an eventual expenditure. If this market force wasn’t constantly balancing the Bitcoin price, it would lead to the absurd consequence that one of the main objectives of Bitcoin, such as being a payment network, would also be its downfall.

Bitcoin as an Instrument of the Exchange Market

The speculative market of change for the Bitcoin price evolution is considerable. The performance of Bitcoin as a market instrument is spectacular and qualifies the cryptocurrency as a Super Commodity. No speculative instrument has ever reached the phenomenal growth of Bitcoin. From the Bitcoin quote of $ 0.08 in June 2010 to its highest point near $ 1,150 in November 2013, it has grown 1,400 percent in less than three and a half years.

Considering that the exchange operations that we have mentioned above represent monthly or daily expenses, their relative volume is minuscule compared to the millions of bitcoins that are bought and sold in the Bitcoin speculative market every month.

The players that exert influence over the Bitcoin price in this category are:

  • Retail exchange traders.
  • The pioneers in adopting Bitcoin that withdraw in fiat money.
  • Institutional entities such as investment funds and ETF’s.

Summary

The pushes and pulls in the Bitcoin price are diverse. Some are slow but constant, as is the gradual increase in the supply/demand curve of a stable bitcoin supply base. Others are violent and sentimental, such as the speculative operations that result in the purchase and sale of tens of thousands of bitcoins each day through exchanges.

The Bitcoin price charts show an increase in the average price despite the opposing pressures that often exert their influence on the long-term market. The balances of some and others as traders and consumers in the predominant purchase or tendency to sell.

Banks and governments, for the most part, react erroneously to the disruption of Bitcoin. Some are embracing innovation, while others are caught in arrogance.

Some aspects of Bitcoin, such as contracts, have not been explored and promise to add additional value, and, therefore, price increases in the future.

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