Table of contents
- Everything You Must Know About Bitcoin Pricing
- Dynamics 1: Supply and Demand
- Dynamics 2: Behavior of Investors and Traders
- Dynamic 3: Technicalities and Analysis
- Dynamic 4: Price Cycles Bring Phases
- Dynamic 5: What’s the Halving Effect
- Dynamic 6: Institutions Involvement Brings Change
- Dynamic 7: Government Regulations: Good or bad?
- Technological developments
Hey, curious minds, have you noticed the changing trends in Bitcoin Pricing? Well, everyone is well aware of the pioneer of cryptocurrencies, Bitcoin. The pricing analysis of this cryptocurrency opens doors for a new world in cryptocurrency, raising the curiosity of people about various aspects of the bitcoins such as “What is the price of 1 Bitcoin”, “ On what aspects the pricing depends?” What makes the prices of Bitcoin soar so high or fall at times causing losses? And many more questions come to one’s mind.
From being introduced in the year 2009, by Santoshi Nakamoto and being almost anonymous to today being one of the popular financial assets for people, or if we say one of the common names in every household, Bitcoin has come a long way creating great hype for itself. After learning about what really bitcoin is, and how it works, one of the most Googled time questions is “What causes the fluctuations in its prices?”
Coming to the price analysis of the bitcoin one would encounter words like MACD, RSI, averages, etc. making the concept look tougher but you must be reassured because this article would clear all your doubts. For a glance, the Bitcoin Price trajectory is influenced by human emotions, the global economy, regulations, etc. But above all, the fact to be kept in mind is that Bitcoin and most importantly the cryptocurrencies are unpredictable, thrilling, and fluctuating with boundless possibilities for growth and innovation.
Well, this article brings you all the answers and learns about the various factors influencing the ever-changing value of Bitcoin- The Financial Revolutioner.
Everything You Must Know About Bitcoin Pricing
Dynamics 1: Supply and Demand
There exist only 21 million coins, which means Bitcoins are limited. This limited asset is gaining massive popularity through more acceptance, mainstream adoption, etc. which means more demand. Now when the supply is limited and demand is more, the prices will drive up. Moreover, the liquidity of Bitcoin leads to upward pressure in the price along with smooth and stable pricing.
Dynamics 2: Behavior of Investors and Traders
What decisions the investors will make, and what actions they take significantly affect the prices of bitcoin leading to fluctuations. In other words, market sentiment influences the market where if the decisions are positive, more technologies are established, and innovative ideas are brought then this will lead to the rise of demand whereas if the decisions generate negativity, regulations, or breaches, this may impact the pricing negatively causing the drop in prices.
Another angle to this is that often a trend is followed creating a herd mentality that further promotes price movements and even a hike in price due to the hype created. Price movement is also observed if higher trading or lower trading volumes is developing heightened interest and in some cases may manipulate the market causing stagnation of prices respectively.
Dynamic 3: Technicalities and Analysis
Technicalities highly influence the fluctuations in the prices of Bitcoin. But what do technicalities mean? Well, the term technical analysis can be described as studying the back history of data related to the prices, and market indicators that can help to predict the movements in prices in the upcoming times and the trading volumes. The technical analysis will help to find out the resistance levels and the support system for Bitcoin’s pricing chart. Little confused hearing the word support levels and resistance levels. Let’s come to these by one.
- The support levels could be explained as those price levels at which the cryptocurrency will bounce back from the ongoing losses when it finds a potential buying interest.
- The resistance levels are also type of price levels but these vary from the support levels in a way that these are observed when a selling pressure is developed leading the prices to reverse from the uptrend.
Another indicator could be the moving averages which hint toward the smooth-out data related to pricing. Moreover the Relative Strength Index (RSI) and the oscillators can be considered to assess the asset. For instance if the RSI value goes above 70, the conditions are in the overbrought situation whereas below 30 price rebound may occur due to oversold conditions.
Dynamic 4: Price Cycles Bring Phases
First, let us define “What are price cycles?” a certain pattern of the price movement that keeps on repeating over time is defined as Price Cycles. The cycle follows a procedure where the growth is observed, then comes the times where either the price goes up making correction or it will drop.
“Why price cycle analysis is important?” there is no specific limit to how long any phase will occur. It all depends on the conditions generated due to various factors but the analysis give clarity abd insights about the history of price behaviour. The above mentioned factors influence the price cycles generating various phases such as:
- Bull Run Phase
- Blow-off Top Phase
- Correction Phase
- Bear Market Phase
Then this cycle repeats again.
Dynamic 5: What’s the Halving Effect
One of the most important factor is this “Halving effect”. The event is mentioned in the Bitcoin protocol and adversely affects the monetary policies. Well this halving event or also called helvening is a programmed event. Basically this event occurs every 4 years which makes sure to cut the value of reward by half which creates a condition of artificial scarcity. When a scarcity is created, the supply of the bitcoins is slowed leading to inflation rate decrease resulting in the growth of bitcoin as deflationary asset with time.
Dynamic 6: Institutions Involvement Brings Change
What is meant by Institutional involvement? Well institution involvement do not means that government authorities will control the bitcoins or its working or impose any regulations snatching the freedom on assets but Instituional involvement is related to the investors from the big firms, corporations, managers managing assets, pension funds etc.
How the Institutional involvement affect the market?
- A significant influx comes with entrance of the investors into the market, increasing the buying demand, which results into hike of prices.
- More is the institutional involvement, more is the liquidity of the bitcoins creating higher trade volumes. Further, it becomes easier for investors to buy and sell Bitcoins.
- More institutional involvement generates trust among the people about the cryptocurrency and bitcoins. This boost in confidence brings a sense of acceptance encouraging the adoption of cryptocurrency.
- More the institutional involvement, more will be the potential for long term growth setting a stable environment in the Bitcoin market.
- The entry of repeatable institutions into the market, enhance the value of Bitocin attracting more media coverage and hence a positive sentiment.
Dynamic 7: Government Regulations: Good or bad?
Government involvement in the traditional currency has inculcated a trust among the community whereas bitcoins and cryptocurrency which are far from the control of government has not yet gained much adoption and acceptance. Therefore government involvement and regulations can affect the prices of bitcoins adversely. When the system is regulated is creates a sense of trust influencing various aspects like adoption rates, liquidity, demand etc which leads to rise in the value.
Following are some points which will impact the cryptocurrecy prices on the basis of government regulations:
- A regulation based framework brings recognition and promotes the asset as legitimate. Hence generating confidence among the people.
- A designed framework with proper regulations fosters stability in the market, reduce the risks of fraud, consumers protection and other risks.
- Central Bank Digital Currency (CBDCs) may impact the demand and use of bitcoins either creating a complimented alliance or competing environment for the already existing currencies.
- Market integrity could bne improved by enforcing actions to avoid frauds which will foster confidence among people.
Another fact worth mentioning is the technologiucal innovations and advancements to this cryptocurrency networks. More high tech the environment more is the value.
Other than these there are some more facotrsa influencing the bitcoin market such as macroeconomic factors including geopolitical uncertainites, currency devaluation, market manipulationetc.
Well readers, we talked about the influencing factors of the prices of Bitcoin and if you are also interested in this make sure to do a thorough research as the market is highly volatile, there can be fluctuations in very short time. No doubt the cryptocurrency arket has a great potential for growth in future and the market is evolving with time bringing more opportunities. Hence do invest but before making a decision, make yourself well aware about things like diversyfying the portfolio, invest that which you will not mind losing, be cautious about the hype, keep yourself updated with the regulatory developments and above all do consult a financial advisor initially and staying calm during the peak times of the market is real key to get profits. Hence with that, its time to conclude. Investments are exciting and thrilling but you must know that its your hard earned money you are investing and thus it is your sole responsibility to take decision with caution.
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