Dec 30, 2018 00:30 UTC
Dec 30, 2018 at 00:30 UTC
How Is The Price Of Bitcoin Determined?
Bitcoin has lost more than half of its value in less than 6 months. Three months ago, it was trading at over $6,000, today, it is just $3,912.
Unsurprisingly, Bitcoin investors have been predicting about the recommence meteoritic rises any day now.
But, Bitcoin has so far denied to cooperate, staying stubbornly stuck below $4,000 for the last two months. How can we know when it will rise again?
While many follow Bitcoin’s price, not everyone knows how exactly this price is determined.
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How Bitcoin’s Price is Determined?
Bitcoin’s price isn’t the same as its value. Its price is determined by the market it trades in. That’s done by means of supply and demand.
This is the same way the price of your old car, a bag of oranges in the supermarket, an ounce of gold and just about everything else is determined.
In a simple term, it is the continuous interaction between buyers and sellers who are trading with one another determining the specific price of Bitcoin.
When determining the price, one has to consider the amount which a buyer is willing to pay for the future value of a particular item.
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In other words
If the market believes the price of something some property will increase in the near future, then they are more likely to pay for it.
Some of the examples, where Bitcoin currently has utility, were mentioned above, but as Bitcoin is an evolving cryptocurrency works on Blockchain Technology, a number of people are optimistic that there are many other use cases to come.
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The Reason For Change in Bitcoin Price
This is known as volatility and it’s not just Bitcoin exchange rate, which seems to change regularly. The price of a lot of things, like currencies, stocks, oil and many other products can be quite volatile. Even their price can go up and down a lot of against a base currency.
The overall Bitcoin market is still relatively small as compared to the other industries. It doesn’t take major amounts of money for moving the market price up or down. In this way, the price of a Bitcoin is still volatile.
Having said that, the volatility of Bitcoin has been going down consistently, and it has become much more stable in recent times.
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So, there you have it!
In a nutshell, if there something both useful and scarce, it will demand both value and a price.
Bitcoin is both useful and scarce. Thus, it has a value and a price, that is determined by its supply and demand.
The value of Bitcoin and its price are not synonymous! Bitcoin Brain Wallet does a crucial job in this regard.
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