Factors Influencing Bitcoin Price
Bitcoin is among the hottest and most clickable topics in the online and offline media. Its fluctuating nature and price movements attract more investors to buy Bitcoin in search of huge gains in no time, which is not common for other assets. In 2018, Bitcoin still remains the number-one alternative digital currency with the biggest market share and public popularity that has already taken its unique niche in the financial market. Some cryptocurrency experts and Bitcoin millionaires even declare that its potential is still much underestimated.
How the Demand-Supply Rule Works for Bitcoin price
The essential economic rule of demand and supply works perfectly well with Bitcoin. When the demand rises, the value of Bitcoin increases. When the supply grows, the price dumps as well. To make a long story short, when a lot of buyers come in the market, stimulated by any possible lever, the demand goes up together with the Bitcoin price. When Bitcoin investors sell off in panic caused by bad news or by other reasons, it results in the decrease of the coin value. Initially Bitcoin was designed to have a limited number of 21 million coins, the so-called theoretical total supply, which can be controlled. It is also considered a deflationary cryptocurrency, because comparing to conventional paper money its inflation rate is next to nothing. Both features move the price of Bitcoin up in the long run, similar to traditional hedge assets as gold. These and the decentralized nature of the cryptocurrency make it a unique and one of the priciest investment tools ever appeared globally.
News: Positive and Negative Influence
Thumbs UP
Let’s consider what factors had positive and negative impact on this cryptocurrency through its history. Being decentralized and without any physical backing up in the material world, Bitcoin highly depends on the news of all kinds. Its price can leap up tremendously when the media make much hype around its upward movement trends causing many buyers join the ride in pursue of unprecedented earnings from their newly-made investment. The most famous case of such an intensively featured price rise occurred in last months of 2017 when the number of Bitcoin investors increased, causing the cost reach 20,000 USD. Besides, every time the media report about the increasing interest in Bitcoin from big institutional investors and their further initiatives, the price of Bitcoin rises high. It gets considerably more value backed up by the expertise and professional reputation of the financial institution involved.
Thumbs DOWN
The appropriate example of the negative influence on the Bitcoin price can be, for instance, the news about the notorious hack of the Japan-based cryptocurrency exchange that made many investors around the world sell off their Bitcoins. It dumped the price essentially and very quickly. Another workable strategy to plunge Bitcoin locally and globally can be any news about bans or corrections imposed on the cryptocurrency by the national government or financial regulators. For example, a misleading official report from Indian government in February 2018 brought the decline of Bitcoin price, though the country only tries to regulate the cryptocurrency. Therefore, news and media hype of any kind can effectively influence the price of Bitcoin, both up and down. Local and global media either keep featuring the hottest topics and gain more clicks in order to keep the pace or point out their personal view on the subject supporting or criticizing Bitcoin. As a rule, prominent world-known business media companies are owned and operated by the national tycoons. Such individuals and corporations are used to feature information in the way most convenient to lobby their own corporate interests. Strengthened by the power of public persuading they have and an all-time desire to boost own ratings, it becomes evident that media channels often present not so impersonal point of view regarding the cryptocurrency environment and tendencies.
Government regulations
As soon as Bitcoin is a decentralized digital currency that needs no middlemen or state regulation to be transacted, it causes a headache for governments, national financial bodies and banks. Most countries are still on their way to officially recognize or restrict/prohibit the cryptocurrency. There are Bitcoin-friendly destinations as Japan, Singapore, many Western European and the North American countries. But there are also big nations that are less loyal to Bitcoin values, including China, India, Russia, though the cryptocommunities are rather strong and numerous in these countries. Some states have already totally banned cryptocurrencies, like Algeria, Bolivia, Bangladesh, Ecuador, Kyrgyzstan, and Nepal. Any information about the government corrections, tax regulations or even total bans always brings a strong decline to the Bitcoin price. There are a lot of vivid examples of such prohibitions that resulted in the major value dumping. Throughout the history, China, as the country where Bitcoin has been always widespread and popular due to cheap electricity for mining and multiple traders, has always made an impact on the global Bitcoin trading market. When it finally denied access to all cryptocurrency exchanges which traded Bitcoin and altcoins and were involved in ICOs, this resulted in the heavy Bitcoin trading decline not only in the Asian markets but all over the world.
‘Whales’ vs Manipulation of Bitcoin Price
The early adopters of Bitcoin as well as big cryptocurrency investors are called market whales because they possess the massive fortune in digital coins. They say that around 1,000 of cryptocurrency investors can own 40% of total number of Bitcoin. In reality, most of the financial markets are topped by a bunch of big players, the Bitcoin market hasn’t become an exception. Moreover, whales as individuals or groups are known to manipulate cryptocurrency trading significantly, making the beneficial movements of price with their own assets to grow more wealth. Small market traders try to earn quickly by trading on the price waves made by big players. As a rule, many from the ‘little fish’ lose their funds heavily, but there are also those who can successfully predict and take advantage from the volatile market trends. In times when Bitcoin moves bully, there is always a fear that any whale would like to cash out their income and dump the current price. And usually it goes like this making the price dump. The most vivid case of the Bitcoin price handling refers to the story of the ‘BearWhale’ who sold off his stack of Bitcoin for the cut price of 300 USD per coin in 2013. It’s worth mentioning that this is the only time when the crypto community united to fight the whale and even managed to eventually rise the price.
In a nutshell
There exist so many factors like publicity, geo political or financial speculations to name a few that result in roller-coaster price movements of the most popular cryptocurrency ever. Any Bitcoin-related negative news talking about government regulations, cybercrimes in the market or bringing strong criticism from public influencers is able to decline trading significantly. However, positive hype together with the news about growing cryptocurrency adoption throughout the world lead to new all-time high prices of Bitcoin that is still on the way to open up its full potential.