What’s fueling the bitcoin boom?

What's fueling the bitcoin boom?The outbreak of cryptocurrency in the www.chesworkshop.org/bitcoin-prime/ drove the price of bitcoin to $1000 in 2013, sparking millionaire strategies, provoking declarations of bubbles and enhancing the finance sector to a larger extent. After which, the price rose to $19,000 in 2017 due to high competition and market manipulation. While talking about the present value, Bitcoin now has a value worth $35000 with the technical hardware part costing over $260 million.

The world’s largest asset manager, Larry Fink of BlackRock said that bitcoin will become a huge market and the enthusiasm is boosting potential investors from all around the world.

BITCOIN – A BRIEF INTRODUCTION

A decentralised form of digital currency with no central or single authority which can be sent from user to user in a bitcoin network. Bitcoin transactions are secured through private and public keys eliminating the chances of any third-party access. The private key allows users to access these digital transactions whereas the public key is used for sending or receiving bitcoins. In order to prevent scams, fraud and investment loss, one should keep the private key confidential. Now you must be thinking about where did this word “bitcoin” come from and how they were actually generated?

A pseudonymous person named Satoshi Nakamoto created Bitcoins in the year 2008 through a process called “mining”. It involved utilising huge hardware machines and solving complex mathematical equations in order to yield these digital assets. The solution was derived by miners who form groups and get a small percentile of the product once found. Bitcoins are considered as a reward for mining and can be exchanged for currencies, and services. However, with this, comes a huge set of myths and cons. Bitcoin initially was criticised for the illegal transaction and the usage of a large amount of carbon footprint and electricity used in the process. Being highly volatile, Bitcoin trading must be done with expert guides and full awareness to eliminate the chances of any risk and scam.

HOW IS BITCOIN’S PRICE DETERMINED?

Bitcoins are not issued or authorised by a central bank or government, and are completely free from monetary policy, economic growth rates, inflation, rates and central measurements in the country. These factors do not influence the price value of bitcoin,

Factors affecting Bitcoin’s price value –

  • Sale and use regulations
  • Supply and demand
  • Cost of production
  • News developments
  • Internal governance.
  • Rewards to miners
  • Competing cryptocurrencies

1. SUPPLY AND DEMAND

Based on the fact that a scarce product will have higher prices compared to the asset available in a huge amount. Bitcoin’s price works on the same principle. The crypto protocol enables only new bitcoins to be developed but at a fixed rate that is designed to decrease over time. The supply was decreased to 4% in 2018 from 6.9% in 2016. Whereas in the case of demand, bitcoin works on economic and geopolitical manners. For example, bitcoin is popular in countries with high inflation rates such as Venezuela increasing the media coverage with reference to potential investors. 

2. COST OF PRODUCTION

Based on the marginal cost of production, it is a rough sum of the direct fixed cost for electricity and infrastructure required in mining and an indirect cost of the equation algorithm.

3. GLOBAL COMPETITION

Bitcoin is highly in competition and has been playing the dominant one for a long time. It accounts for 80% of market capitalization in the crypto world and attracts millions of investors from all over the world.

4. SALES AND USE REGULATIONS

Bitcoin is unregulated and has attained a regulation-free ecosystem and is independent of inflation and monetary policies.

5. NEWS

Media coverage and policies alter the bitcoin process based on philosophical disagreements about the future of investment with relevance to crypto.

SUMMARY:

Bitcoin’s price is affected by various distinct factors ranging from the cost of production to miner rewards and more. One needs to learn its volatile nature before digging deep into this sector of finance and utilising digital coins. Bitcoins are a popular form of cryptocurrency being the global competition and are independent of monetary policies. Being the dominant one when compared to other forms of digital coins, bitcoin’s prices are not fixed however new bitcoins are always generated at a fixed price as mentioned.

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