Bitcoin is a widely popular cryptocurrency devoid of authority like banks or government over it. Also, it does not have a recognized status of legal currency. But at the same time, the private party can use Bitcoin to make transactions if they are agreed on some conditions mutually. Bitcoin is also traded and purchased on exchanges. We find a large number of investors who purchase Bitcoins through many cryptocurrency exchanges. Bitcoins’ legal status is different in every country. There are so many countries where Bitcoin is banned.
A detailed report by the US Library of Congress throws light on the bitcoins regulatory status in different parts of the world. We all know very well that Bitcoin as a cryptocurrency is considered a volatile investment when we observe the basis of currency price.
In 2009 when Bitcoin was launch official price was determined for it. As a result, it was not sold like a regular currency. Its price started to develop when the first exchange was established.
In the beginning, Bitcoin’s price was small just a few cents. It was also not being tracked like the traditional stocks in the market. Gradually, regularly until 2013 Bitcoin started to flourish, and in October 2013 Bitcoins price reached $123.50. Since then it keeps on soaring high touching $140 price in April and topped $1,000 by December the same year. And we are seeing that the ever-increasing value of Bitcoin is attracting more and more traders towards it.
Factors That Influence Bitcoin’s Price
Nobody sets Bitcoin price specifically. The market sets its price. This process makes the currency pricing more complex as the price is different on each exchange. You can understand it by looking up the Bitcoins price on the internet and would find its different prices in different exchanges. Like when you see Bitcoins price on coindesk.com on June 1, 2020, it was $9,710.72. And on Winkdex.com it was $9,402.79 the same day.
These are all aggregating prices so it is impossible to trade Bitcoin via these index sites. The price or value depends on the source from where the data is collected. And Bitcoin is a coin that is never traded in one place. Multiple exchanges are involved in its trade and they all set their average price. This price is determined by the trades which are done on different periods.
These Indexes collect data of prices from a number of exchanges and then take out an average price. But not all the indexes do the same practice to gather data. The traders interested to buy or sell Bitcoins would choose the exchange of their choice which will offer its average price. Bitcoin,s price experiences frequent fluctuations as it depends on the price information coming from different exchanges.
Liquidity and Price of Bitcoin
The price of every crypto coin including Bitcoin is volatile due to currency liquidity. It is bought and sold fastly. The continuous flow of Bitcoins through the market at any given time enables investors to quickly enter or exit from their current positions. It is simple to understand. When some kind of asset is traded in a high number, it might face any difficulty in shifting the price in any single direction. The same is the case with fiat currencies like the US dollar and the British pound. These currencies are traded in high volumes every day. But Bitcoin is much smaller a coin than these currencies. So whenever a single event takes place, it makes a bigger difference in its price.
Events That Can Change Bitcoin’s Price
Many factors are involved to affect the Bitcoin market. In any case, if it is revealed that a big state is failed to regulate bitcoin as we have seen in China-its the price can fall.
There are also some other elements too to influence its prices. Bitcoins are available in abundance and also produced at a reliable and predictable rate. These Bitcoins are distributed roughly in terms of their ownership. Some of these owners hold a huge amount of Bitcoins in their wallets. So with the additional feature of liquidity, it becomes easy for people to operate the market. Also in a few cases, Bitcoins price fall when traders sell off it enlarge amounts. It happened so when a company named BearWhale overturned the market and sold off its Bitcoins reserve below the market rate.
It is recommended that when you devise your Bitcoin trading strategy, do it carefully. Bitcoin is a high-risk coin and sometimes even the experts in the market lose money in this volatile market.
Featured image: Medium