10 Things That Can Affect the Bitcoin Price
We saw Bitcoin prices surge past $20,000 (USD) and it has increased over 500% since July 2017, which has never happened before in history. The spike went out of control, but now as of September 2018, it is currently hovering around $7000 (USD) mark. We have seen this up and down movement a number of times before and with this being said, there are a number of dominant factors that can impact the price of Bitcoins. So here are 10 things that can affect the Bitcoin price for you to consider.
1. Supply and Demand
Like most markets, supply and demand is the number one factor for price. Demand for Bitcoin impacts the price directly because if more people want to buy Bitcoin, then the price will increase for it as fewer people want to sell which means that the circulation is not increasing fast enough to meet the demand. While on the other hand, if no one demands Bitcoin the price will fall. Since Bitcoin has a maximum supply limit that will never cross 21 million, it means the supply is very controlled therefore, it could be predicted that the Bitcoin price will steadily increase.
The Bitcoin price is heavily impacted by the media and big news announcements. The media can impact the Bitcoin price using both negative or positive publicity. The news about Bitcoin being a scam, a country banning Bitcoin or a celebrity endorsing Bitcoin can lead to people buying or people selling purely based off reading that news. However, it could be said that some negative publicity can actually benefit to trend the cryptocurrency, as it reaches more people bringing awareness and curiosity. Additionally, media hype about Bitcoins such as blogs or social media, can lead the prices to spike, while negative media can cause prices to decline.
The number of users can impact the price of Bitcoin. It could be safe to assume, the more people using Bitcoin, the higher the price per coin. With more and more merchants accepting Bitcoin, we’re seeing a rise in it’s adoption worldwide. However with adoption still relatively low with the total cryptocurrency market cap at around $200 billion dollars (Sep 2018) compared to Gold’s market cap $7.8 trillion dollars, you could say it has plenty of room to grow.
As you know, Bitcoin is not controlled or bound by any precise government regulations therefore, the governments have trouble to lay down regulations towards it. However, some countries have placed laws on regulating Bitcoin impacting the Bitcoin price. For example, Japan has many stores that take Bitcoin as a form of payment since the government made cryptocurrency a legal payment since April 2017. This has made the Bitcoin rates and prices to surge in Japan because of the legitimization by Japan. Conversely, China has blocked all it’s residents from buying Bitcoin or any cryptocurrencies which has no doubt had an effect on the price of Bitcoin in China and worldwide.
Hackers can impact the Bitcoin price as we saw in April 2013. The hacking of Mt. Gox considerably decreased the price of the currency and this also meant that users had lost trust within the exchange community. This is a constant threat which at any time could affect the price of Bitcoin if a major exchange gets hacked or ICO gets hacked and loses funds.
Some users are starting to do illegal activities with cryptocurrencies such as Bitcoin and Monero. These cryptocurrencies are ever so popular so they primarily need it for it to operate. These illegal businesses can include Ponzi and MLM schemes, and when the global government identify these activities then that’s when the value for Bitcoin may be affected. We have seen Ponzi schemes exposed the most famous being Bitconnect. Although this didn’t seem to move the Bitcoin price much, it sure left a mark on the market with investors becoming more wary of such things.
7. Rumours & Speculation
Rumours and speculation can have a big impact on the price of Bitcoin and individual cryptocurrencies. As people suggest some insider knowledge which spreads, others may be inclined to buy and so it has a snowball effect. A common term used is ‘pump and dump’ which is when a coordinated group of people all buy at the same time rising the price, only to then all sell and see the price collapse, leaving some people with big losses.
8. New Technology
Having updated technology can affect the price of Bitcoin, making it more secure, faster, cheaper, and easier to use. An example, could be the integration of using Bitcoin PayPal type system as a payment system making it super easy for the everyday person to use. Other technologies maybe coming soon to Bitcoin are The Lightning Network enabling instant transactions and Atomic Swaps enabling cross chain trading.
The term ‘Whales’ refers to investors that can buy or sell large amounts of Bitcoin and cryptocurrencies. When they buy or sell it impacts the price either up or down almost instantly. Interestingly, according to Bloomberg only around 1,000 people own 40 percent of all existing bitcoin, which means that there are a few whales in a big ocean of little fish.
10. Risk and Investment
Risk vs reward can also be a factor on the Bitcoin price as regulations are established and new ways for big money to get into the market through index funds and stable coins. We could see a price movement as the risk decreases, investors may be more willing to put their money in. Especially if a new ETF allows edge funds, stock traders or anyone to directly buy Bitcoin on the stock market.