Factors affecting Bitcoin price

Factors affecting Bitcoin price

Factors affecting Bitcoin price, there are several main factors driving the rise or fall of cryptocurrency prices. The following report reviews the most important of these factors:

Factors affecting Bitcoin price

First: Supply and Demand

This is a basic economic principle. If a cryptocurrency has a high token supply with little demand from merchants and users, the value of the cryptocurrency will drop. Conversely, if the supply of a particular cryptocurrency is limited and the demand is high, then the value of the coin will increase.

This is linked to the scarcity that drives prices and is one of the factors that have pushed the price of Bitcoin up to its highest levels. The supply in Bitcoin stops at 21 million Bitcoins - which is relatively low compared to other tokens - while demand has risen in recent years.

Second: speculation

Speculation is one of the most factors that can affect the prices of cryptocurrencies, it is possible that speculation raises the price of an asset to very high levels, and it can also take it to sharply lower levels.

Rapid and strong fluctuations are among the things that characterize digital currencies and open the appetite of traders because they create opportunities to earn money through buying and selling short-term, but of course, it comes with higher risks.

Speculators aspire to make huge fortunes by dealing in electronic currencies, but they buy and sell them very quickly, which leads to short-term fluctuations.

Third: regulation

The perception of these currencies varies - from country to country - between recognizing these virtual assets, prohibiting them, or warning against their use, without preventing them or considering them illegal, or strictly regulating them, and new decisions are taken all the time.

In an era of globalization, decisions in a country can affect the entire world. Cryptocurrency prices tend to respond quickly to any decisions regarding legalization or prevention, for example, when Japan announced that Bitcoin was a legal tool for trading, its price rose strongly in just twenty-four hours.

Japan, which previously represented only 1% of Bitcoin's trading volume, reached after its decision to legalize cryptocurrency trading to 6%, and Japan even achieved 55% of global trading volume in some days.

In an opposite example. When China imposed strict measures on the cryptocurrency earlier, which caused a major crisis, especially since China generates about 60% of the Bitcoin currency.

But it later returned to relax those measures and allowed mining companies to operate under much less stringent procedures, which greatly contributed to increasing confidence in cryptocurrencies.