Cryptocurrencies have been available to the general public for about a decade, but recently, their usage has been a popular topic. Many people have begun to invest in one of the many digital coins that are now widely available, such as Bitcoin, Ethereum, Solana, etc. Mining is the process of creating these currencies. It is only available to experts who use high technology computers to solve complex mathematical equations in order to produce cryptocurrencies such as Bitcoin. Bitcoin is the oldest and most popular of them. The blockchain technology that drives these coins, which is based on the concept of decentralization, is necessary for their long-term survival and security. However, Bitcoin price is dependent on few factors. Let’s discuss what are those.
How does Bitcoin Work?
To get this, we must first understand how Bitcoin differs from a fiat currency. The main difference is that fiat currency is supported by governments and declared banknotes. It’s worth is derived from the fact that two parties in a transaction place their assurance in it. Most countries use a fiat currency system in which central banks and economic reserves regulate the money supply and indirectly control prices.
Bitcoin is never exchanged in a centralized location. Instead, it is traded on a variety of networks, each of which sets its own average price depending on the deals that are taking place at the time. It is the reason for different average prices in different exchange websites at the same time.
Liquidity of Bitcoin
Bitcoin price is very fluctuated due to the currency’s liquidity (ability to purchase and sell it quickly). Investors can enter and exit positions quickly due to the quantity of Bitcoin flowing through the market at any given time.
When a large number of people are trading a single asset, it becomes more difficult for a single person or event to move the price in a single direction. This scenario can be visualized through the Buy/Sell values in Cryptocurrency applications. This is also similar to the impact of whales.
Many facts have had an impact on the Bitcoin market. If the government economists are unaware of the Cryptocurrency procedure and dissatisfied with the flow of Dollars into the country, the government will ban the transactions. Due to this type of scenario in China, Bitcoin price fell from $58726 to $33524 from April 1, 2021, to July 1, 2021.
Major traders selling Bitcoins in large quantities could also drive the price down in some situations. One such trader caused a temporary market crash by selling a huge amount of Bitcoin below market value.
Implementation in large numbers
The value of a crypto coin can increase if more individuals invest in it. These digital currencies are still a long way from being widely accepted. Because they are related to real-world issues, and some projects are not successful, they cannot be exchanged as freely as fiat currency for goods and services. In order to improve profits by transactions to the buyer, popular Cryptocurrency applications like Binance, Coinbase, Webull, and Gemini has upgraded with many features. Hence the Bitcoin price experiences many changes in smaller magnitudes.
- The above discussion is neither financial advice nor financial recommendation. It is a basic study on cryptocurrency which is done based on resource sources. Therefore, our team accepts no responsibility or liability for any predictions/decisions you make in the industry.