Factors that affect the Bitcoin

Started by almedajohnson, Jul 26, 2022, 01:30 AM

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almedajohnsonTopic starter

It should be noted that the world of cryptocurrencies is still relatively new and unexplored, which means that their influence may be even more significant. However, let us focus on the main factors that determine the exchange rate of bitcoin in various currencies.

There are several internal factors that affect the value of bitcoin:

1. Limited supply: Only 21 million bitcoins can be mined, similar to gold, which is a scarce resource. This scarcity directly affects the exchange rate of bitcoin and increases the hype around this cryptocurrency.

2. Decentralization: Unlike fiat currencies, digital assets are not controlled by any state or global economy, and only the owner can manage them. Fiat money loses its credibility as banks can block or withdraw funds, leading to an increase in attention to cryptocurrencies such as Bitcoin to protect assets from inflation.

3. Controlled issuance: The algorithm built into Bitcoin dictates that every five years, the supply of Bitcoin will reduce by half. This mechanism regulates the process of generating a large number of digital coins and controls the level of supply and demand in the crypto market.

4. Network complexity: Mining decentralizes cryptocurrencies, which prompted Satoshi Nakamoto to introduce rules for producing one blockchain block every 11 minutes to manage the overall production rate of bitcoins.


What interests me the most about Bitcoin is its limited supply and its groundbreaking nature. All other cryptocurrencies stem from Bitcoin and its blockchain, with modifications made over time.
The cost of Bitcoin is significantly influenced by demand and limited supply, as well as availability on the exchanges.

nikola Kras

The growth of the cryptocurrency exchange rate is influenced by a variety of and seemingly insignificant reasons, such as tightening regulation of the cryptosphere in China or new comments by Elon Musk.  ;D  ;D  ;D


Apart from global factors and significant changes in the financial system, local events can also heavily impact the exchange rate of digital currencies. For example, during the Hong Kong protests, Bitcoin's price on LocalBitcoins exceeded the market average by $350. A similar situation occurred in Argentina when the national currency and government bonds collapsed after the defeat of the country's president in the primaries, resulting in a nearly $1,000 increase in Bitcoin's value. However, such local fluctuations are typically short-term and do not affect the cryptocurrency exchange rate beyond the country's borders.

As the Bitcoin market grows, it is increasingly correlated with various national currencies. This year, for the first time in history, Bitcoin has earned the controversial title of "safe asset". If the coin becomes less volatile and establishes itself as a recognized means of preserving wealth, it may even outpace gold due to accessibility, limited supply, ease of transfer and storage, among other unique features that make it special and attractive.

The growth of cryptocurrency exchange rates can be influenced by seemingly unimportant reasons, such as stricter crypto regulation in China or new statements from Elon Musk. However, what determines the long-term development of prices? How can the price of Bitcoin surge to $120,000 overnight? And how did the cryptocurrency market become valued at $2.9 trillion? Iconic Funds and Cryptology Asset Group, a German stock company, conducted a study analyzing the price determinants of 27 top cryptocurrencies, including Bitcoin, Ethereum, and Ripple's XRP.