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Bitcoin is a popular cryptocurrency that has become very popular today. This cryptocurrency is the most expensive globally, and its value has constantly been increasing over different years. In 2009, bitcoin was not traded in any exchange. Bitcoin prices were first recorded in an exchange office in 2009. The value of Bitcoin in 2009 and the first year of its life was zero dollars! The price of bitcoin in 2010 never exceeded $ 1. In this article, we will look at the growth of bitcoin value to find out some interesting facts in this regard.

What determines the price of bitcoin?

The price of Bitcoin is measured in Fiat currencies such as the US Dollar (BTCUSD), the Chinese Yuan (BTCCNY), or the Euro (BTCEUR). Therefore, bitcoin seems to be somewhat similar to any symbol traded in foreign exchange markets.

However, unlike Fiat currencies, Bitcoin has no official price; Global exchanges announce-only different price-based averages. Bitcoin Average and CoinDesk are two such indicators that report the average price of Bitcoin. It is normal for bitcoin to be traded at an exchange price that is slightly different from the average bitcoin price.

Supply and Demand

A general answer to the question “Who determines the value of bitcoin?” Supply, supply, and demand. Price detection occurs at the intersection of buyers ‘demand and sellers’ supply. By adopting this model to Bitcoin, it is clear that most of the supply is controlled by the initial miners and acceptors.

Supply

Inspired by the scarcity of gold, Bitcoin is designed to have a fixed supply of 21 million coins, more than half of which have already been produced. Several early adopters were wise or lucky enough to acquire, buy, or extract large quantities of bitcoin before it reached significant value. The most famous of these is Satoshi Nakomoto, the creator of Bitcoin. Satoshi reportedly owns one million bitcoins or about 4.75 percent of the total supply (21 million supply).

If Satoshi dumped these coins in the market, oversupply would break the price. This is true of all big bitcoin owners. However, any rational person seeking to maximize their returns should distribute their sales gradually over time to minimize the benefit of increasing the value of bitcoin to others.

Currently, miners produce about 3,600 bitcoins a day, part of which is spent on electricity and other business expenses. The total daily cost of the extracted electricity is estimated at $ 500,000. Dividing this total cost by the current bitcoin price will give you an approximation of the minimum number of bitcoins that miners market each day.

Demand

Given that the current extraction bonus per block is 12.5 BTC, the annual supply-demand fluctuation is approximately 4%. In 2020, the value of bitcoin fell sharply after the mining award was halved. The price of bitcoin is rising despite such high volatility (the price of bitcoin also increased last year when it was the coin award!) And this shows extremely high demand. Every day, buyers buy the thousands of coins miners, and other vendors offer.

A common way to measure the demand for new entrants in this market is to monitor Google data (from 2011 until now) after searching for the word bitcoin. The reflection of public interest in bitcoin strongly correlates with its bitcoin value. Media reports about the price increase of Bitcoin will end in favor of speculators, and a feedback loop will be created. This usually results in a short-term bubble followed by a recession. Bitcoin has experienced at least two such cycles and is likely to experience more in the future.

Stimuli of interest

In addition to the fact that experts were initially attracted to bitcoin because it was seen as a solution to technical, economic, and political problems, the general public was also attracted to bitcoin during the advent of bitcoin through banking sanctions and fiat currency crises, increasing value. Became bitcoin.

Banking sanctions

Probably the first such example was the WikiLeaks banking embargo in late 2010, in which Visa, MasterCard, Western Union, and PayPal avoided providing financial support to WikiLeaks. Julian Assange was barred from bitcoin until mid-2011 after asking a question Satoshi. However, this event increased the value of Bitcoin as an anti-censorship-resistant electronic currency.

Bitcoin smuggling continues illegally. Although only 5% of British users have accepted to buy drugs with Bitcoin, this figure is probably not correct for legal reasons. Finally, the media controversy over illegal markets has probably drawn the attention of many people to bitcoin, who otherwise would not have been aware of such a cryptocurrency.

Fiat currency crises

Bitcoin wallets can be much more secure than a bank account. After the Cypriots’ savings were confiscated in early 2013, the people of Cyprus began to learn how to use bitcoin. The incident reportedly triggered a price surge and raised researchers’ doubts about the banks’ relative risks to bitcoin.

In 2015, tight controls on capital were imposed in Greece. The Greeks had to withdraw their money. This time around, Bitcoin proved to be worthless money without central control.

Soon after the Greek crisis, China began devaluing the yuan. According to reports, savings account holders in the country turned to bitcoin to protect their accumulated wealth.

Bitcoin Chart 2015 with Tyler Dardan’s explanation of zero risk coverage is an influential factor in increasing the value of Bitcoin in Argentina. Argentine President Mauricio Macri, who recently voted in the election, has promised to end capital controls. This will resolve wide differences between US exchange rates / black market pesos. Argentines who can buy bitcoins using black-market dollars are unlikely to face significant financial problems.

Market manipulation

The discussion of the value of bitcoin would not be complete without mentioning the vital role that market manipulation plays in increasing price fluctuations. At that time, the high prices of bitcoins, which reached more than $ 1,000, were partly due to automated trading algorithms or bots running in the Mt.Gox exchange. There is ample evidence that these bots acted fraudulently under the direction of the exchange’s operator, Mark Carpels, and increased the overall price of bitcoin by offering false prices. Mt.Gox Exchange was a large Bitcoin exchange and a market leader. Currently, there are several large exchanges, so the poor performance of one exchange will not have much effect on the price.

The main undesirable risks

Bitcoin is a pilot project and, therefore, an extremely risky asset. Several factors influence the devaluation of bitcoin, the most important of which is the legal risk of a government ban or strict regulation of bitcoin businesses. The risk of forking the Bitcoin network in different ways of its development is also an issue that can affect the price of Bitcoin. Eventually, the emergence of credible competitors, backed by major central banks, is likely to lead to a loss of bitcoin market share.

Strange prices

Sometimes the value of bitcoin in exchange is quite different from the agreed price. In mid-November 2015, the price of Bitcoin at the Gemini Exchange reached $ 2,200, while at other exchanges, it traded at around $ 330. Then, the trend of these trades was reversed. These events sometimes occur in exchange offices due to human or software errors.

Bitcoin will eventually be a valuable currency with which people trade. Bitcoin is often an important topic in human psychology and economical computing. Never let your emotions get in the way of your actions in the market; This will be achieved by defining a strategy and following it carefully.

If your goal is to collect bitcoins, the best way is to set aside a fixed and affordable amount every month to buy bitcoins, no matter how much bitcoin are worth. Over time, this strategy (known as the average dollar cost) will help you collect bitcoins at a reasonable average price.

Concluding remarks

In this article, we took a look at the growth trend of bitcoin value and saw what issues affect it. If you are interested in this market, it is better to enter it with research and not be afraid of risk. Every market is risky, and Bitcoin is no exception.