It’s quite well known that the Bitcoin market has a very volatile nature and the reason it is so volatile is mostly because of it being such a young concept. The Bitcoin market is similar to any other market if you consider the factors that influence it. It is mostly defined by supply and demand. When the demand is higher than the supply prices rise people are ready to pay much more for 1 Bitcoin than they would in a situation where supply is high and the price is decreasing.
That is the reason why the Bitcoin is constantly reaching peaks and crashes. How does that happen? Simply, by the fact that once the demand gets higher, the price goes up and that, yet again, creates an even higher demand since when Bitcoin’s value is on the rise everyone wants to invest in the currency with the hopes of making a profit in the future. That continues to happen until the moment where people start selling their Bitcoins because of a price increase and a desire to earn money. At that moment, supply keeps getting higher and higher and the Bitcoin prices keep going down. When the price goes down demand goes down as well making supply increasingly higher. This lead to the crash of the Bitcoin market.
There are several factors that influence the supply and demand. Adoption is important since the rise of Bitcoin adoption causes prices to rise. This is because there is a finite amount of the currency. Legal issues concerning states and the government’s influence the adoption rates and are a very important factor. Improvements in technology are also important because of advancements in blockchain technology, result in cryptocurrencies becoming desirable, which in turn causes prices to rise. There are numerous factors in question, but the above-mentioned are the essential ones.