Three determinants of the Bitcoin price

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Bitcoin is known to be one of the highly volatile currencies in the world of digital assets. Its price fluctuates more often than gold and any investible asset you can think of. In 2017, the Bitcoin price rose to near $20,000, but followed immediately with a price fall to as low as below $3500 in the long known market pullback. By the end of 2019, the price of Bitcoin amounted to $6,932 and climbed up to $8,369.59 by the end of February. This movement in the price of Bitcoin raises the question of how and why the price keep fluctuating.

There are a number of factors considered to influence the price of Bitcoin. Below are three of them.

  1. The law of demand and supply: supply and demand remains an important factor for price determination in the Bitcoin market. For instance, if the supply of a particular good in the market increases and the demand decreases or remains the same, the price of the good will fall and vice versa. This is basically how the Bitcoin price works. The more investors want to buy Bitcoin, the higher the price gets.
  2. Impact of the media: There have been reports on how much the media is able to influence the price of Bitcoin. The media space happens to be the best platform for throwing more light on Bitcoin and other cryptocurrencies. A person wanting to invest in Bitcoin is dependent on the news. The more positive news the media puts out there on Bitcoin influences more investors to get involved, and this affects demand in the long run.
  3. Political influence : Political influences may have an effect on the price of Bitcoin rather in a positive way as compared to central currencies. People tend to invest more in digital currencies, especially Bitcoin, when they loose hope in the economic state of their country. There has been several reports on how people immediately invest in Bitcoin after economic crises. In 2015, Greece experienced such, making most of it traders invest in Bitcoin. In 2016, after Britain decided to leave the European Union, people were largely influenced to invest in Bitcoin, hence shooting its price up.

It is important to know that every financial market has its highest and lowest points Just like the Bitcoin and other cryptocurrencies. It is, however relevant to stay abreast with time and information in other to be expectant of what lies ahead and then know how to go about it.

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