What Factors Affect the Price of Bitcoin and Why Does the Price Vary so Much?

Bitcoin was the first cryptocurrency to become mainstream and Bitcoin transactions are happening constantly. 50 million US dollars are transacted every day in Bitcoins There are more than a few factors affecting the price of Bitcoin so the volatility of the currency is not a surprise. Here are some of them.

Supply and demand

For starters, every time users are buying Bitcoin or exchanging another currency for Bitcoin (increased demand) the price rises. Also, selling Bitcoin or exchanging Bitcoin for some other currency creates a drop in the Bitcoin price. In one sentence – high demand for Bitcoin and low supply leads to increase in the price.

Government regulations

Different governments around the world try to impose regulations on Bitcoin transactions. China, India and South Korea are one of many countries who have imposed regulations. Every time a government does something like this, the price of Bitcoin is affected. They value changes drastically when actual restrictions are made (like banning cryptocurrencies altogether).

News and media

Considering the fact that bitcoin is a popular media subject, news can affect the price. Positive news lead to increase in the price and negative reviews lead to decline. Bad news about hacks, government regulations or illegal activities can cause users to panic and stop buying (and start selling!) Bitcoin which inevitably leads to decline in the price.

Popularity as a means of transaction

Many companies and businesses started accepting Bitcoin as a means of transaction. Wider usage leads to increase in the price of Bitcoin. When companies and businesses start to “dump” Bitcoin as a means of transaction, the price is affected in a negative way.

Keep in mind that Bitcoin is a volatile currency, like other cryptocurrencies. Many events affect its price directly or affect users’ confidence in investing. There are many sites which keep track of price changes so you can use them to stay informed.



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