People always say that bitcoin and other cryptocurrencies are highly volatile, but do you know the reasons for this price fluctuation? You can find a price fluctuation up to 5-10% in this market, and it is normal for the crypto ecosystem. Crypto-like bitcoin is not backed by any government and there is no set of regulations for cryptocurrencies available in the world. People have faith in fiat currency because it is widely accepted and approved by their government. If you are planning to trade bitcoin, you can visit bitqs.online to start your trading journey.
When it comes to investing in cryptocurrencies, especially Bitcoins, you should not spend your coins and tokens for purchasing goods and services that you normally do with your fiat currency.
For example, you cannot give your gold jewelry to a Starbuck outlet to buy a cup of coffee because you know that gold has a decent value and cafeteria-like Starbucks cannot accept your gold as a valid payment mode. Similarly, you can consider your bitcoin as digital gold and hold your coins for a longer period of time to get a huge return.
Factors That Determine Bitcoin Market Value
The price of bitcoin is hugely dependent on the supply and demand system of this coin. For example, bitcoin is capped with a certain number and miners cannot mine unlimited coins as per their wish. If there is a demand and shortage in the supply then the price of bitcoin will automatically increase.
Each cryptocurrency including bitcoin has its own supply and demand chain, and they can mine such coins and burn their coins. In the case of bitcoin, the burning mechanism cannot be found because bitcoin is capped at 21 million and the authority of this coin does not need to burn its coins to manage its supply chain system. On the other part, ETH and other cryptos do not have such caps and they have to burn their coins when the supply is increased.
- As you know that miners can mine such coins by solving some complex mathematical problems and they can add a block to the bitcoin blockchain network by verifying a transaction with Bitcoin. Bitcoin isis a decentralized cryptocurrency, with no central authority involved in taking any part when people choose to invest in Bitcoins. Miners can get rewards by adding a new block to the blockchain network of this coin. Miners have to invest a huge amount to set up their own infrastructure because it requires a huge power and computing system. So, if the price of bitcoin is low then miners will stop working on the blockchain of this coin. It is natural that the price of bitcoin will go up to protect the interest of the miners.
- There are many exchanges available where you can find various cryptocurrencies in the form of tokens, coins, and contracts. Small exchanges have a limited number of coins and tokens. Cryptocurrencies always try to list their currency on as many exchanges as possible because it can increase their investors. Exchanges have some fees and you need to pay the transaction fees for transferring your coins. So, such a price range of such exchanges can increase the price of bitcoin and other cryptocurrencies.
- People get confused while they invest in Bitcoins, comparing them with the traditional financial commodities like gold and metals. There should be a clear set of regulations for cryptocurrencies because it is required to give a clear picture to the investors. For example, ETFs can provide more clarity about bitcoin to investors as it is registered under a stock exchange. Due to this uncertainty, the price of bitcoin can fluctuate to a great extent.
Conclusion
Apart from these aforementioned points, you can find some news on social media about bitcoin every day, even every minute, there will be more than twenty posts published on social media. Such negative news can create a great impact on the crypto world and people can start selling their coins by reading such fake news. So, it can play a major role in the price fluctuation of bitcoin.