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Buying and selling.
supply and demand.
free markets.
confidence.
Supply and demand is the most likely culprit, as bitcoins become more popular their price will rise and as more bitcoins come into the market their price will drop in theory bitcoins will come to a point where they have a set price though as people will always be buying and selling and trading with them their price can never be exact its the same reason any currency fluxuates
Wondering why bitcoin is rising or falling? Here are a few key factors that tend to affect its price.
To say bitcoin is volatile is an understatement. Its price can swing wildly on the turn of a dime, making and breaking fortunes in the process.
That might lead you to ask:
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What affects the price of bitcoin?
Truth be told, it’s a complicated question we might not be able to answer for sure. However, you have a few ways that might help you see where bitcoin’s price is headed.
If you keep an eagle eye on cryptocurrency news, you just might be able to buy or sell bitcoin profitably before everyone else catches on. But a big caveat that comes with all cryptocurrencies: There’s no guarantee. To keep up with events that may affect the price of bitcoin, check out our bitcoin newsfeed.
What affects the price of bitcoin?
There’s always something happening in the cryptocurrency world. As news gets out to the public, investors react and trade bitcoin accordingly.
Countless factors affect bitcoin’s price, and it’s difficult to predict what bitcoin will be worth in the future.
However, specific types of events often lead to big moves in the market. Here are a few.
Government regulation of cryptocurrency.
Political and economic upheaval.
Media hype and trader enthusiasm.
A quick intro to bitcoin
If you’re just getting started with bitcoin, welcome. You’re in for a thrilling ride.
Bitcoin is a cryptocurrency — a digital currency. You can’t touch it like you can a dollar bill. Rather, it exists only in the electronic world on something called the blockchain.
Blockchain — what’s that?
The blockchain is a digital ledger that records every bitcoin transaction ever made. No single person controls this ledger. Rather, it’s maintained by everybody who uses the bitcoin network.
For a crash course on bitcoin and the blockchain, check out our Bitcoin for Beginners guide.
Though bitcoin is a currency, many people don’t use it to buy things. Instead, they buy and sell bitcoin as an investment on cryptocurrency marketplaces — or exchanges.
More than 100 exchanges exist around the world, on which investors trade hundreds of millions of bitcoin every day. As they buy and sell bitcoin, these transactions affect its price. The question is: What influences people to trade?
What affects bitcoin’s price?
Countless factors affect bitcoin’s price, and it’s difficult to predict what bitcoin will be worth in the future.
However, here are a few specific types of events that often lead to big moves in the market.
Government regulation of cryptocurrency.
Bitcoin was designed to operate independently from a central institution. But its fate appears tied to one type of central authority in particular: governments.
When a major government announces cryptocurrency regulations, bitcoin’s price often moves significantly. Just one quote from a government official can send bitcoin into a tailspin.
For example, in January 2018 the South Korean justice minister said the government might ban cryptocurrency trading on domestic exchanges. Bitcoin’s price fell almost $2,000 in just one day.
Japan is the largest cryptocurrency market in the world by trading volume, and South Korea is the fourth largest. When their governments announce regulations, you may see big movements in bitcoin’s price. Stay tuned to news from these countries.
You may also find it valuable to track China-based news, which has heavily affected bitcoin’s price in the past. It’s unclear how much the Chinese market affects bitcoin today, though, as Beijing has significantly limited citizens’ ability to trade cryptocurrency.
Political and economic upheaval.
In uncertain political and economic times, citizens may grow nervous about their savings. They may subsequently buy bitcoin to limit their risk from an unstable currency or move money out of the country.
The runup to the Brexit referendum, for example, brought tremendous economic uncertainty. Around that time, the British pound dropped in value while bitcoin’s price increased. On May 20, 2016, one bitcoin was worth $443. By the time of the Brexit vote in late June, its price had increased to almost $800.
Media hype and trader enthusiasm.
The bitcoin market is a hotbed of human psychology. Retail traders tend to buy and sell based on emotion and market hype, which can lead to significant swings in bitcoin’s price.
Retail traders are small investors that buy and sell bitcoin for their personal accounts. They’re the “regular people” in the market, the mom-and-pop traders.
As you might imagine, retail traders often don’t have access to information known by institutional investors — hedge funds, investment banks and so forth. Many of them don’t use rigorous techniques for evaluating bitcoin’s price. As such, they often trade based on their gut feelings, making them especially responsive to market hype.
When bitcoin gets a lot of positive press — especially from the mainstream media — retail traders tend to buy more of it. Additionally, new users hear about it and buy it for the first time. Traders grow overly enthusiastic, and bitcoin’s price increases rapidly.
This may indicate a bubble, or a situation where bitcoin’s price is higher than the coin is really worth. As soon as the media reports negative news about bitcoin, traders may start to sell their holdings in droves. This can lead to widespread panic selling, resulting in a rapid fall in bitcoin’s price.
This is a common cycle in the bitcoin market. To become adept at spotting it, try following bitcoin news consistently. With time, you may learn to identify when market enthusiasm is growing — and when it’s about to run out.
Bitcoin’s recent price history
Here’s a short history of bitcoin along with movements in its price. Before this timeline’s start date, bitcoin had been on a remarkable run: Worth $1,000 at the beginning of 2017, it had grown to $4,500 by September.
September 4, 2017: China announces it’s cracking down on ICOs.
China bans initial coin offerings in early September, saying they have “seriously disrupted the economic and financial order.”
In an initial coin offering (ICO), a startup sells a new cryptocurrency in exchange for money or other cryptocurrencies. The startup can then use this funding to grow.
Bitcoin had been riding high at around $4,500. After China’s announcement, it steadily loses around 33% of its value, sliding to around $3,000 by the middle of the month.
At this time, the Chinese government also says it’ll ban all cryptocurrency exchanges in the country. But bitcoin’s price seems to have fallen far enough. As investors scoop up bitcoin at a discount, its price quickly rebounds to $4,000.
November 28, 2017: Bitcoin breaks through the $10,000 price barrier.
It’s a huge day for cryptocurrency: Bitcoin finally passes the $10,000 mark. After this psychological barrier is broken, bitcoin begins a monumental run to $18,000 by December 7.
December 7, 2017: Negative news crashes the party.
After bitcoin’s prodigious growth, it seems the market is finally exhausted. Furthermore, bitcoin is hit with a flurry of bad news:
Cryptocurrency publication CoinDesk reports that South Korean regulators have banned bitcoin derivatives. Furthermore, the chief executive of the Futures Industry Association (FIA) expresses serious concerns about bitcoin futures contracts.
Cryptocurrency mining marketplace NiceHash is hacked, losing 4,700 BTC (worth $78 million).
Online gaming platform Steam announces it will no longer accept bitcoin for payments. It says bitcoin’s fees are too expensive and the coin’s price too volatile.
By December 9, bitcoin has fallen to $13,000, a loss of 27%.
December 9 to 17, 2017: The market bounces back.
With the launch of bitcoin futures on Wall Street, mainstream investors help propel bitcoin from $13,000 to $16,000. Cryptocurrency sees a steady stream of good news and achieves several important milestones:
Swiss bank UBS announces it’ll use an Ethereum-backed blockchain to comply with European data laws.
Litecoin shoots up 80% in 24 hours, taking it to an all-time high of around $300. Dash reaches $1,000 — a 233% rise from its November price of $300.
Bitcoin traders are excited by the imminent arrival of the Lightning Network. Built on bitcoin infrastructure, it will allow users to send and receive bitcoin instantly while paying less in transaction fees.
On December 17, bitcoin surpasses $20,000 for the first time.
January 1, 2018: Bitcoin recovers in the new year.
After hitting its $20,000 high on December 17, bitcoin slows considerably. It falls to $13,000 by January 1, 2018.
However, retail traders still seem enthusiastic about other cryptocurrencies. Stellar Lumens reaches an all-time high of $0.91 — a 900% gain from the previous month. And Ripple hits an all-time high that’s near $4 — a 1,300% gain from a month ago.
Check this out: Ripple vs. Stellar
Traders seem to believe bitcoin at $13,000 is a bargain, and it rises to $17,000 by January 5.
January 10, 2018: Is South Korea banning bitcoin?
South Korea’s justice minister says the government is preparing to ban cryptocurrency trading on domestic exchanges. Bitcoin’s price drops almost $2,000 within a day, from $15,000 to $13,000.
Subsequent reports that the South Korean government won’t ban bitcoin lead to the coin rebounding to $14,500.
January 15, 2018: Government regulation in Asia.
China banned cryptocurrency exchanges in September, but many traders have found ways to continue buying and selling bitcoin. The government announces it’ll crack down on “exchange-like services.” South Korea’s government, meanwhile, says it may still ban cryptocurrency trading.
By January 17, bitcoin’s price has plunged from $14,000 to $9,500, a loss of 32%.
Late February 2018: Where will bitcoin go?
After falling as low as $6,200 in early February, bitcoin sits at close to $11,000 at the time of this writing.
What will it be worth in the near future? It’s anybody’s guess. Wall Street chief investment officer Peter Boockvar predicts bitcoin will fall to $1,000 this year. Meanwhile, hedge fund manager Mike Novogratz thinks bitcoin could reach $40,000 by the end of 2018.
It’s difficult to say who’s right. What’s certain is there are many more twists and turns in store — exactly what we’ve come to expect from an ever-unpredictable bitcoin.
Bottom line
Every day, countless people try to predict where bitcoin’s price will move next. Many of them will be wrong. The price of bitcoin fluctuates heavily daily, often rising or falling without any significant news.
That doesn’t mean news doesn’t matter. On the contrary: Properly analyzing news can mean the difference between profit from your bitcoin holdings or taking a loss. How you choose to act on the news is up to you.
Why Bitcoin’s Price Is So Volatile
In 2017, Bitcoin’s value soared from $1,000 to just under $20,000 before dropping down to around $13,000 at the end of the year. Since then, its value has risen and dropped sporadically from day to day, dragging smaller cryptocurrencies like Ether and Ripple along with it.
If you’re new to cryptocurrencies, this kind of volatility can be dizzying (and painful if you invest at the wrong time), but if you take a closer look it starts to make sense. Here’s why Bitcoin’s price keeps changing so drastically, and why it may get more stable in the future.
Bitcoin Is Still Very New
Bitcoin was first released in 2009, but it only really gained mainstream popularity in 2017. The technology is still extremely new and misunderstood, and that’s a big part of why its value is so hard to pin down.
Add to that the fact that most of the Bitcoin in the world is owned by a tiny group of people. As of late 2017, about 95 percent of the cryptocurrency was owned by just over four percent of people with Bitcoin, according to one report. That means that a single person could decide to release huge amounts of Bitcoin into the market at any moment, completely upending its value.
The price of Bitcoin can also change drastically as countries and financial institutions adapt to the idea of cryptocurrency. For example, when one of South Korea’s biggest banks tested out the technology it caused a spike in value. On the other hand, when China announced plans to crack down on sketchy Initial Coin Offerings (ICOs) the value of Bitcoin dropped, and the same thing happened when a South Korean government official said the country might ban cryptocurrencies altogether.
Bitcoin is Different From Everything That Came Before it
Bitcoin isn’t really like anything else thanks to the blockchain technology that powers it. It’s also treated differently than other types of currencies and commodities because we’re still not sure what it’s actually for. That leads to a lot of instability.
The original pitch for Bitcoin was a frictionless version of money that you could send to anyone all over the world: cash for the internet. However, because Bitcoin’s value rose so dramatically, and because each transaction takes a ton of computing power (and electricity) to process, it doesn’t actually work very well as a form of spendable money. That’s created uncertainty, which leads to rapid changes in its value.
Unlike other types of investments, like stocks or gold, Bitcoin trading never stops, either. There are no market hours. Instead, you get non-stop 24/7 trading, which means even more fluctuations in Bitcoin’s value and less stability day-to-day.
How Bitcoin Could Become More Stable
The best bet for Bitcoin is that as it becomes more popular and more people buy it, these types of changes in value will go down for two main reasons. First, individual owners have less power over the price of Bitcoin, and, second, it creates stability since more people have a stake in the cryptocurrency.
The other possibility is that government regulation could help stabilize Bitcoin. In the short term, that could cause its value to drop drastically (like what happened in China and South Korea), but in the future it could help calm down speculation and drive out the types of sketchy Bitcoin-related business that threaten to drag down the entire concept of cryptocurrencies.
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