What Affects the Price of Bitcoin?

As the most popular and original cryptocurrency, Bitcoin is easily a household name. While most people know what Bitcoin is, understanding the factors impacting its price is another matter entirely. Bitcoin is certainly volatile, but this does not mean it is completely unpredictable. There are several key factors that impact its value, all of which interact with each other.

Supply and Demand

As with any other commodity, one of the biggest factors determining the price of Bitcoin is the relationship between supply and demand. There is a set protocol in the Bitcoin code and blockchain for new coins to be created. This only happens at a set rate through mining, with growth slowing down over time. This makes it possible for supply to increase more slowly than demand, inflating the price. At the same time, there is a maximum number of Bitcoin that can be in circulation: 21 million. When this number is reached, the supply element will not impact Bitcoin price since it will not change. Instead, other factors will play a larger role.

Competition From Other Cryptos

Bitcoin is still the most popular and biggest cryptocurrency, but it is far from the only one. As more cryptocurrencies enter the market, the demand for Bitcoin may lower slightly in favor of some others. This is particularly true in the case of coins with clear, real-world uses.

That being said, the fact that competitors are present should mean that the value of Bitcoin will stay in check. Because, however, cryptocurrencies are still so new, we do not know yet whether this will be the case with competition for Bitcoin.

Regulation

Regulation will play a key role in the price of Bitcoin, but it still remains to be seen how it will play out. Countries are still trying to decide whether to regulate Bitcoin and other cryptos, and if so, what regulations to put into place. Regulations that restrict the use of crypto will likely hurt its value, while those encouraging adoption will boost its value.

Availability

Unsurprisingly, the availability of Bitcoin will also impact its price. People will not show the demand for it if they cannot easily buy and sell the currency. As Bitcoin becomes more easily available, more people will also hear about it, generating increased interest and boosting the demand.

Usefulness

The ability of people to actually use Bitcoin will impact its price in a similar way to availability. If Bitcoin is accepted at more places, it will help generate interest in the crypto. This also helps show real-world value to the coin, further encouraging adoption. Both of these factors indicate that as more places accept Bitcoin, it should increase in value.

The Takeaway

Even with an idea of what effects the price of Bitcoin, it is impossible to know for sure which direction it will head in. Experts have made educated guesses, and there are numerous predictions. Only time, however, will tell the future prices of the first cryptocurrency.