Bitcoin Price – What Are The Factors That Influence It?

Bitcoin

Bitcoin is a digital currency that is highly volatile which made it a hot commodity among those interested in speculative trading. Though the prices have stabilized currently and the price is are not as high as it once used to be, it does spark interest among speculators. The speculators are indeed to inquisitive about the factors that might influence the price of the bitcoins. The interest is mainly for them to be aware of why there is a price change and be aware of what you can expect as far as dealing with the Bitcoins is concerned. You can expect such an awareness to help you understand where, when and how to invest money.

Bitcoin Price factors

There are quite a number of factors that might exert influence on the bitcoin prices. But it is impossible to clearly specify them. But this list, however, relates to the most influential factors, however, it is in no way an exhaustive list of the factors.

The Buyers

This is the most important factor that is capable of exerting an influence on any type of commodity that is available for sale. a market for the product exists only when there is someone to buy what is being offered. Likewise in the case of the bitcoins that are being traded too, you need to have buyers who are willing to buy it.  When you intend to buy a bitcoin on an exchange, you place an order. But, you place an order specifying the value at which you are willing to buy the bitcoin.  This means you as a buyer influence the price of the bitcoin. But, since the bitcoin market that is open to a large number of investors/buyers, the number of buyers, as well as the price they are willing to offer for the bitcoin, can increase the price as well as the overall value of a particular bitcoin. In this light, you may consider the highest bidder to buy bitcoin at a particular time as the one who is capable of influencing the price of the bitcoin. Subsequently, it also influences the value of the bitcoin.

Large Bitcoin Sellers

If a trader of bitcoin sells Bitcoin on an exchange, at a low amount than what is going in the market, it would not influence the price in a big way. even if there is a change in the price, it would not be highly significant. But if the seller is one who holds a large number of bitcoins his order would not be filled in a single price. This effects a price drop. When there is selling on large scale in the exchange, there will be a drop in the value of the bitcoin.

Dumping

This refers to the selling of bitcoin by businesses that hold a large portion of the bitcoin. Usually, this is done for them to meet the operational expenses in businesses. The reason for dumping as far as bitcoin is concerned is because it cannot be used to pay taxes, wages of employees etc. this is because dealing in bitcoins is not one that has caught up with the world. Therefore, depending on the number of companies that resort to dumping as well as the volume of dumping is likely to influence the price. An additional factor that would contribute to the price drop is the panic selling that follows dumping which pulls the price further down.

News

There is News about bitcoins from different sources. The news is definitely one that most people follow. When there is an article published, the bitcoin speculators act on it by buying or selling depending on the content of the article and what they interpret about the article. this is followed by a large number of people who happened to read the news. Therefore, it might have a role to play in increasing or decreasing the value of the bitcoin.

Mining

The bitcoin miners sometimes engage in buy and hold investment strategy like certain types of mutual funds which is a reason for the decrease in the value of the bitcoin. when there are more miners the network would be secure as there is no possibility for anyone to own 51% of the mining power and engage in the attack. The attack would possibly lead to potential panic selling. Another factor that brings about a decrease in the value of the bitcoin is that the miners tend to sell a large portion of their profits to meet the electric bills that they have to pay for mining.

The use of bitcoins for shopping would indeed popularise the bitcoin as a credible currency. Though it might not influence the price in any way, it would definitely play a role in creating a large market.  Government regulation is one other factor that might lead to the stability of the prices. Be aware of the factors so that you will understand the best way to invest money in bitcoin.