Bitcoin is the world’s first cryptocurrency, which appeared in response to the global financial crisis of 2008-2009. It is like the online version of cash and is technically a collection of numbers stored on multiple computers around the globe. Bitcoin is based on the DLT (distributed ledger) blockchain technology. Blockchain is a technology for creating, storing, and managing digital transactions that are public, secure, and distributed. Blockchain is the cause why cryptocurrency is so popular.
There are 18,769,031 Bitcoins in circulation, and the maximum number is limited to 21,000,000 BTC. By the way, a limited number of coins is one of the factors affecting the price of Bitcoin.
Today, with bitcoin, you can buy products and pay for services. The global Covid-19 pandemic has been an impetus for large companies (Micro strategy, Tesla, Square Corp) to turn to bitcoin as a save of value against inflation.
How does cryptocurrency work?
Cryptocurrency is a virtual (digital) currency based on a ledger that is decentralized and protected by cryptography. Any crypto coin, like bitcoin, is essentially a computer file stored in a “digital wallet” application on a smartphone or computer. People can send bitcoin (or part of it) to your digital wallet, and you can send bitcoin to other people.
Like any other cryptocurrency, Bitcoin does not belong to a country, group, or person. It belongs to users. People are drawn to the anonymous nature of transactions. Although every bitcoin transaction is recorded on the blockchain, the purchaser’s and sellers’ names are never published; only their wallet IDs are made public. Many crypto enthusiasts are confident that the value of bitcoin will continue to grow, and more people and companies will begin to use them as a financial settlement.
What affects the price of bitcoin?
People interested in this use the manipulative strategy FUD (fear, uncertainty, and doubt) to influence the price of specific cryptocurrencies or the cryptocurrency market. A rumor or opinion leader’s comment is launched to lower the price of a digital asset, and the initiator of the message gets a much greater profit from this.
Four main factors affect the price
Bitcoin supply and demand
- The greater the popularity and constant demand for a cryptocurrency, the higher its value. Now many users are switching to bitcoin as a currency for online trading. Leading financial companies are starting to use it to make online transactions.
- MasterCard, one of the most popular financial products, plans to accept some cryptocurrencies as payment on the company’s platform.
- One of the leading US-based asset managers, Blackrock, has also started trading bitcoin.
- Elon Musk’s Twitter message that Tesla can be bought with bitcoin led to a rise in the price of coins.
- These facts can serve as an excellent confirmation of the predicted increase in bitcoin price.
Rules related to cryptocurrency
Governments have begun to monitor activities using cryptocurrencies actively. If the rules become too strict or oppressive, the value of the cryptocurrency drops. On the other hand, if the rules are favorable for the crypto industry, they can be a catalyst for rapid growth. If investors feel apprehensive about a particular government announcement or decision, the price of bitcoin could plummet.
Reward cut in half
The halving of the reward will significantly affect bitcoin mining. In the world of bitcoin, there is a limit of 21 million. It is not like fiat money, which is subject to inflation.
The third halving took place in May 2020 because of block rewards from 12.5 BTC to 6.25 BTC per new block. The next bitcoin reduction will occur in 2024.
Each of the previous halvings resulted in peak price increases.
The market capitalization of bitcoin
Market capitalization is also a factor that can affect the price of a currency in an ever-changing scenario.
Bitcoin (BTC) is the most recognized and accepted cryptocurrency worldwide. However, thousands of others are vying for their places in your investment portfolio, such as Tether (USDT) and Ethereum (ETH). While Bitcoin remains the most valuable cryptocurrency in terms of market cap, altcoins such as Ethereum (ETH), Tether (USDT), Binance Coin (BNB), Cardano (ADA), and Polka Dot (DOT) are among its big competitors. In 2021.
Before making any transactions with bitcoin, it is necessary to analyze all these factors. It will help you increase your profits in the long run.
Best time to buy bitcoin
There is no precise answer to when it is better to buy, and there cannot be. If bitcoin performs well, it will likely continue to serve in the short term. If its value grows by more than 20% per week, you need to buy a cryptocurrency.
Conclusion
It is necessary to remember that the volatility of bitcoin is the field on which earnings occur. Many factors influence the cost of bitcoin, and there is no ideal time to buy it. Before buying bitcoin, you need to evaluate your capabilities and invest no more than 5% of your income. You should also choose the proper bitcoin storing method with caution.
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