Despite the fact that Bitcoin is a relatively new asset and its price history is not very large compared to more traditional markets, there are certain known factors that influence the price of the first cryptocurrency by market capitalization.
Discover in this article what What determines the price of Bitcoin?
Evolution of the number of available tokens compared to demand
The relationship between supply and demand is always one of the most influential factors on the price of an asset. Out of the total supply of BTC tokens limited to 21 million tokens, nearly 19 million tokens are already in circulation according to data from Coinmarketcap.com. Due to this limited money supply, Bitcoin is considered a scarce asset. The greater the demand, the higher the price of BTC will rise. Conversely, the lower the demand, the more the price will decrease.
Bitcoin Halving: What You Need to Know
To control the evolution of Bitcoin's money supply and its rate of inflation, the reward a BTC miner receives for authorizing transactions and securing the network is halved roughly every four years. This is known as the “halving” or “halving” process. Generally, this event is followed by a bullish phase of Bitcoin because of the scarcity of the supply of BTC.
Bitcoin Blockchain Update
Each update of the Bitcoin blockchain, bringing more security, flexibility or speed, makes it possible to evolve the network and potentially improve its level of adoption by individuals and professionals. This is why it is worth following the roadmap of important Bitcoin blockchain updates, as they usually move the price of the token.
Bitcoin Adoption and Acceptance Rate
The evolution of the level of adoption and acceptance of the most important token in the world greatly affects its credibility, its legitimacy and its level of use. The more Bitcoin is accepted, the more it will be used. The evolution of the Bitcoin adoption rate in the world should therefore change its price.
Evolution of legislation around Bitcoin
The Bitcoin and altcoin market is currently lightly regulated, although more and more regulators are seeking to regulate this sector to protect investors from the number of cyber-attacks and scams related to cryptocurrencies and to allow companies in the crypto-sphere to evolve within a more suitable legal and legal framework. Some regulations may be restrictive for investors or the evolution of the cryptocurrency world, while others may provide relevant solutions. This is why legislation can move the price of Bitcoin.
Investor Sentiment
The psychology of market participants is an important factor to consider when understanding how the prices of an asset like Bitcoin move, as it greatly affects investor sentiment and guides their actions. Due to the high volatility of the price of Bitcoin, one of the most well-known psychological biases of BTC investors is the feeling of FOMO (Fear Of Missing Out) which causes traders to enter the market for fear of missing an opportunity. .
Level of inflation and interest rates of the world's major economies
Although Bitcoin is a risky and volatile asset, it is increasingly seen as an alternative asset capable of combating fiat currency inflation. Unlike Bitcoin which has a limited supply and is not managed by a central entity, fiat currencies like the Euro are managed by central banks who can decide to increase or decrease the money supply of their currency.
By adopting ultra-loose monetary policies in recent years, central banks have varied the cost and availability of money in their economies to support growth. Such support for the economy generally results in a loss of purchasing power of the local currency.
This is why investors seek out assets like cryptocurrencies, whose value cannot be influenced or manipulated by a central body. The evolution of the level of inflation and interest rates in the major economies will therefore influence the demand and the price of Bitcoin.