Bitcoin is a unique currency. And if you want to make money on its exchange rate, then you should know how the price for this currency is formed. And this happens simply, in the relationship: supply and demand. If you think about it a little, you can easily understand that this ratio can be easily influenced. In particular, the increase in demand (in Lately there is no problem with this, since it is gaining more and more popularity) and proposals.
Bitcoin at $6100 Here we should go into more detail. This factor is significantly influenced by those people whose assets are large enough. For example, they can sell a large amount of cryptocurrency, as a result of which demand will decrease, which means. Or vice versa. They can buy up cryptocurrency, thereby increasing the demand for it, and, consequently, increasing the price of BTC.
Now the most interesting thing: to make successful money you need to get into the period of these jumps. They are happening now and will continue to happen. After all, people want their money not to lie under their pillow at home, but to generate income. And they invest them somewhere.
Why does the Bitcoin exchange rate change?
Financial exchanges exist by making money on exchange rate changes. We have already discussed above what influences this change. But what exactly are the changes?
- A smooth increase or decrease in the exchange rate is a natural process that occurs constantly;
- A sharp rise or fall in the exchange rate means a pumper has entered the market (a person with large assets who is able to artificially influence the price of a cryptocurrency).
Pumpers are wealthy people who make money from young traders. When a large number of young traders come to the market, the demand for currency increases. At this time, pumpers are actively buying up other people's assets, and in addition to natural growth due to young traders, there is active growth due to pumpers. And at the moment when the price becomes as high as possible, they dump all assets and the currency depreciates. At this moment the so-called dump .
Bitcoin's history has seen great ups and downs. Basically, this was done artificially for the benefit of these pumpers themselves. They make up stories about hacked wallets, the unreliability of the site and other fables. Thanks to this, demand temporarily drops and it becomes possible to buy currency cheaper. Then a refutation of this news comes out, and the currency gains popularity again. And, therefore, the price of bitcoin increases. This means the diapers are “chocolate-covered”.
How to make money on Bitcoin or Ethereum?
In order to make money on cryptocurrency there are two options:
- daily monitor world news on cryptocurrency, analyze and make forecasts for the future, and do not succumb to instant decisions, but wait;
- Monitor currency exchange rate changes 24 hours a day and get into the “pump” time. Here you should not be afraid to make a decision within a few seconds.
Both this option has the right to life; there are many examples of people making money from this (). However, as in the market of any currency, you need luck. So if you decide to make money on bitcoins, then may luck be with you.
Due to the growing popularity of cryptocurrencies, more and more people are interested in how the exchange rate of Bitcoin and other coins is formed.
What influences the price of cryptocurrencies?
The price of traditional money consists of many factors, among them: the GDP of the state that issues it, its significance in world politics, the economic situation, the level of exports/imports and other variables.
Cryptocurrencies are decentralized and do not have an external regulator in the form of states or banking organizations, so they are subject to high volatility, and their value is primarily determined by the current level of supply and demand.
Demand depends on how much a certain cryptocurrency is in demand when carrying out financial transactions, as well as on its investment attractiveness.
Most cryptocurrencies have a limited supply, which allows only a certain number of coins to be mined (for example, only 21 million Bitcoins can be mined).
Therefore, the supply is mainly formed thanks to miners, who are the holders of the mined coins and issue them to the market.
The following factors influence how much cryptocurrency will be in demand:
- Transaction efficiency. Processing speed and transaction cost compared to other currencies;
- The number of exchanges, companies, entrepreneurs who are ready to accept a certain cryptocurrency for payment;
- Level of security and confidentiality;
- The number of exchange offices where you can exchange cryptocurrency for traditional money;
- Investment attractiveness.
It was precisely because in 2017 the largest traders considered the huge investment potential in Bitcoin that the demand for it, and accordingly the rate, skyrocketed.
Factors influencing supply
Since the main method of issuing cryptocurrency is mining, it determines the level of supply. The extraction of coins itself depends on the following factors:
- The difficulty of mining new coins, which gradually increases due to the underlying algorithm and because of which, over time, mining requires more and more computing power and electricity;
- Gradual decrease in reward for each processed block.
Based on this, it follows that mining will be carried out as long as it pays off, so the cryptocurrency rate should allow the miner to quickly return the funds invested in equipment and electricity.
Other factors influencing the price of crypto
The value of cryptocurrency, just like fiat money, is determined by various factors. Among the main ones it is worth highlighting:
- Public policy. Despite the fact that cryptocurrency is not associated with the government of any country in the world, the official policy of the authorities towards digital money can affect its rate (especially if the state is one of the economic and industrial leaders of the planet).
- Infrastructure. The more different exchangers, cryptomats and exchanges carry out transactions with a particular coin, the more expensive it becomes.
- Information in the media. The price of a cryptocurrency is also influenced by the amount and nature of information about it circulating in the press, the Internet, and stock exchange reports. One leading economic expert can set the tone of news for a long time, which is often used by trading sharks to speculate in the market.
- Economic situation. In some countries of the world, inflation is raging so strongly that residents, not trusting government money, which depreciates daily, are buying cryptocurrency. A striking example is Venezuela and Abkhazia.
- Alternative investment. The opportunity to receive greater profits compared to traditional assets, most of which generate returns of 1-2% per month, is forcing investors to invest more and more in cryptocurrencies.
Due to the small level of capitalization, the purchase of a certain cryptocurrency even by one large trader can rapidly increase the rate to record levels.
What does the future hold for the cryptocurrency exchange rate?
It is difficult to predict the further development of the value of cryptocurrencies and predict what their rate will depend on in the future. For now, it’s only clear what the value of cryptocurrencies today depends on—hype or, more simply put, increased interest.
However, this does not mean that after the hype subsides they will collapse sharply. Trusting rumors that members of the Rothschild clan, the head of Sberbank and other members of the establishment had invested in Bitcoin, ordinary citizens bought an incredible amount of coins.
Cryptocurrencies represent a revolutionary new type currencies Like any other currency or measure of value, they are only as valuable as we think they are. Some currencies are backed by gold or other precious metals. The value of others is supported only by their popularity and value in the eyes of people.
Cryptocurrencies were conceived as conventional units for storing capital, which are not influenced by the central banks of the world. Let's look at the main factors that influence the formation and change in the price of cryptocurrency. Everything said below applies to all digital coins, not just Bitcoin.
The value (or perceived value) of precious metals is determined by their social utility and limited availability in the market. Their price, like the price of many other things, is determined by such economic factors as supply and demand. In some countries Bitcoin and othersrefer to an asset class, in others to currencies.
The maximum number of coins in the Bitcoin system is about 21 million. Each of them can be divided into 100 million parts. About 7 billion people live on planet Earth. If even one billion of them want to own bitcoins (of which there are only 21 million), it is clear that this cannot but lead to a significant increase in the price.
According to the rules embedded in the system, the release of new coins occurs at a constant rate that cannot change. Thus, the supply is limited, so people who find this coin valuable and want to purchase it are forced to pay more and more.
Reduced block reward, similar to that, which is observed in the Bitcoin system, also helps to reduceand, consequently, price increases. The same thing happens in other cryptocurrencies, although the Litecoin price hardly reacts to this.
Mining energy intensity
Maintaining blockchains is a very energy-intensive activity. Proof-of-work (POW) chains, which are the most popular, require a lot of energy. Today, the Bitcoin blockchain consumes as much electricity as a small country. This is reflected in the price, since mining one coin requires a certain amount of energy. As mining complexity increases, energy consumption increases.
Mayinig difficulty
The more secure the blockchain and the greater the mining difficulty, the higher the perceived value and price of the coins and the more difficult it is to obtain coins through mining. This may also affect the price. In the case of chains such as Bitcoin or,which use proof-of-work, complexity is closely related to ,power consumption.
Public perception has a huge impact on the value of a currency. So, in the case of Bitcoin, the driving force can be people who react positively to innovation. Another incentive may be that the very idea of cryptocurrencies is a blow to the corrupt banking system, and the emerging competitor cannot be dealt with using traditional methods. Negative reactions may be caused by the fact that cryptocurrencies are often associated with illegal activities.
Successful hacking attacks on major cryptocurrency exchanges such as Mt. Gox also undermine the reputation of digital currencies, negatively affecting their prices. But innovations such as improving the security of wallets through the use of multiple signatures and the emergence of new options for online payment can give the price a positive boost.
Many cryptocurrencies cost less than Bitcoin, Litecoin ordue to the fact that the general public does not know much about them. Many cryptocurrencies duplicate the Bitcoin code, differing from their predecessor only in minor technical nuances - the number of coins in circulation, the proof-of-work algorithm, etc. The degree of similarity to Bitcoin without radical improvements in technology or increased utility also affects the reputation of the currency.
Bitcoin price
In the world of cryptocurrencies, Bitcoin is often seen as a “reserve currency.” The rise and fall of its price often affects the value of other coins. Thus, the price of Litecoin often follows the movements of the price of Bitcoin, with the only difference being that it is not affected by an increase in mining difficulty. Considering that Bitcoin was the first cryptocurrency and is the most popular, it is not surprising that its value influences other coins.
Legal aspects
The legal status of cryptocurrencies and government actions can also affect the price. If the government begins to apply pressure in the form of taxes or additional regulation, even a complete ban, the perceived value of cryptocurrencies for investors from that country will decrease. If a cryptocurrency receives official status, the effect will be positive.
Conclusion
Cryptocurrencies have come into our lives for a long time. They provide users with numerous benefits, which means their value in the eyes of people increases.
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One of the main purposes of purchasing cryptocurrencies, including the most popular among them, Bitcoin, is the desire to preserve and increase your capital. This is quite possible, especially if you know how to predict changes in their exchange rate in relation to real currencies. And take appropriate actions with your virtual savings in a timely manner.
What does the Bitcoin exchange rate depend on?
The laws of the cryptocurrency market are very similar to those that apply to the stock market. Thus, the Bitcoin exchange rate is determined primarily by changing supply and demand for it, with the most noticeable fluctuations in value being provoked by participants with substantial assets. It is their actions that provoke an increase in the number of people wishing to purchase virtual currency or get rid of it as soon as possible. When demand increases, the Bitcoin rate also increases, and accordingly, when trading volume decreases compared to the usual level, it falls.
A more common situation is the smooth growth and decline of Bitcoin. Cryptocurrency as a whole has generally been rising in price recently, due to the fact that it is becoming more popular due to the emergence of new startups, services and opportunities. But when sharp jumps occur, this may indicate the appearance of a pumper - a person - on the stock exchange. The size of whose assets makes it possible to create a stir or panic among novice traders, thereby forcing them to take actions that are beneficial to him. Usually pumpers create the appearance of an increase in the rate by buying orders. After the cryptocurrency rate reaches its maximum as a result of rush demand, they drain their assets and the rate falls.
Another way to dramatically change the price of Bitcoin is to disseminate information that will indicate an increase in its investment attractiveness or, conversely, about decisions and events that carry negative consequences. An example of the latter can be regularly appearing news about the desire of the Russian authorities to ban the circulation of cryptocurrencies in Russia and declaring them money surrogates. This, unfortunately, is actually true, but sometimes news feeds can be fake (fictional), and they are distributed specifically to change the course.
How to recognize the difference between a typical and critical change in the Bitcoin rate
The main terms that professionals use to describe what is happening in the cryptocurrency market are correction, fall, pumping and draining:
- Correction They call it a smooth decline in price after a sharp rise or fall in the exchange rate.
- A fall– a sharp depreciation of the exchange rate over a short period of time up to 7%.
- Pumping— a sharp and unjustified (or not sufficiently justified) increase in the exchange rate.
- Drain– a drop of more than 7% resulting from a dump or the appearance of bad news feeds.
Experienced traders are able not only to distinguish between these concepts, but also to predict events in the market in the near future using rate fluctuation charts and other factors. So, if a slight increase in value does not occur even with significant trading volumes, then this in most cases indicates an upcoming drain.
In order to remain profitable when the rate rises after a fall, you need to feel the “bottom”. That is, the mark below which the value of the cryptocurrency should not fall under current circumstances. This will allow you to purchase Bitcoin at the lowest cost.
Conclusion:
Thus, if you want to increase your savings by playing on a cryptocurrency exchange or simply profitably exchange the bitcoins available in your virtual wallet, then you need to:
- regularly monitor market dynamics;
- pay attention to all news and rumors about cryptocurrencies that appear on the Internet and beyond;
- analyze the information received and draw conclusions about the possible impact of events on the course;
- make decisions quickly, choosing the most appropriate moment.
Anyone, even those far from financial investments, will agree that making forecasts regarding changes in exchange rates is not an easy task. Especially when it comes to monetary units of other countries. After all, it is very difficult to take into account, analyze and correctly interpret all the events that occur that may affect the behavior of the exchange rate. This statement applies to all currencies, including bitcoins, the latest generation cryptocurrency, because the price of one bitcoin is . also changes, although according to slightly different laws.
What determines the price of one bitcoin?
In this publication we will try to reveal the essence of the main aspects that influence the value of this currency. This will help you not only get an idea of the mechanism by which the price of 1 bitcoin is formed, but also try to make money from it.
It is important to say here that this cryptocurrency has proven itself well as a liquid asset, although it is not actively used by all brokers.
Why does the Bitcoin rate change?
In fact, there are quite a lot of prerequisites and factors for exchange rate volatility, however, all analysts and experts agree that there are three main aspects on which the price of one bitcoin always depends. These include:
- - The ratio of the actual volume of cryptocurrency and the number of transactions carried out with them. In other words, the relationship between supply and demand.
Difficulties in mining bitcoins. That is, today the trend is that the methods of mining cryptocurrencies are becoming more and more complex and less effective. This cannot but affect the price of electronic money, and as a result, it becomes more expensive.
Potential interest in this currency. Analysts have proven that when the number of topical queries on the network increases, the price of 1 bitcoin also increases. Thus, the higher the interest in a currency, the more it is used, and as a result, the more expensive it becomes.
From the above list, it becomes obvious that the price of Bitcoin today is practically independent of geopolitical factors, while it is completely subject to economic law in terms of user actions. It should be noted that currently, as an investment instrument, Bitcoin is greatly undervalued. To put it simply, few people decide to keep their savings in this currency.
It is the narrowness of the factors influencing the price of Bitcoin that today seriously hamper its growth. And the only thing we can talk about now with some degree of confidence is the stability of this currency.
