What Influences Bitcoin Price?
As a new asset type, bitcoin has experienced volatility in its valuation. Its prices fluctuate wildly as market participants speculate on its current fair value and potential future prices. For the short time it has existed, bitcoin’s value has been influenced by distinct but diverse factors. Like in any other asset, bitcoin prices are influenced by forces of demand and supply. Bitcoin has limited supply because they will only ever be 21 million bitcoins, and the rate of their production is defined. Its demand is however impacted by factors such as regulation, competition and adoption. Regulatory stances regarding bitcoin and cryptocurrencies in general keep on changing, and this can have a significant impact on the coin’s price. For instance, there have been cases of major countries banning mining or cryptocurrency exchanges, and consequently influencing the sentiment in the bitcoin market. The price of bitcoin has also been affected by its adoption or acceptance by users, merchants and institutions. Although bitcoin was the first ever cryptocurrency and remains the most dominant, there have been more advanced decentralized finance projects that have constantly fought to diminish its dominance. Bitcoin prices have always been very sensitive to media hype. Whenever the above factors make headlines in mainstream and social media sources, market participants react to it aggressively. Positive news such as adoption of bitcoin by major companies trigger sharp price rises on the coin. Conversely, negative news such as tough regulation can quickly lead to price crashes.
What is the Bitcoin Hype?
From the start, bitcoin distinguished itself as a unique technology destined to revolutionize the world of finance. And since then, the bitcoin hype has persisted. Its decentralized network was a unique feature. Finally, there was a currency that sought to transfer control and decision making from a central authority to an open distributed network. This made bitcoin a censorship-resistant and borderless digital currency with limitless possibilities. Bitcoin transactions are also immutable, and once a transaction has been posted on the open distributed ledger, no one can erase or reverse it. This promises to promote transparency and integrity between users. Beyond its currency characteristics, bitcoin has also proven to be an incredible store of digital value. Early adopters and believers have reaped big as the value of bitcoin has rose from less than $1 to about $70k. beyond the utility of bitcoin, there has also emerged the potential of bitcoin as tool for societal transformation. There is a group of bitcoin users who believe that using the coin helps in reducing dependence on governments and corporations. Currently, it is estimated that there are over 100 million active bitcoin addresses. That is a significant population that is scattered all over the world. And it guarantees that any media news or announcement that is released has an enthusiastic audience waiting. This is the bitcoin hype. No matter how you view or use bitcoin, its headlines in the news are capable of going viral and having a significant impact on the asset’s price.