Bitcoin (BTC) is a digital currency that, unlike fiat currencies, is not issued by any government or legal entity. Creating, storing and moving BTC requires a distributed network of cryptographic users and protocols. Investors carry out their trades directly via the peer-to-peer network which eliminates trading restrictions and speeds up trading. The number of companies accepting BTC is growing daily, giving it real market value. However, this virtual currency has been severely hampered by security and volatility issues. Even at the height of its popularity, finding concise answers to common questions such as: what determines the value of BTC, who sets the price of BTC, and whether BTC has intrinsic value can seem like a handful task.
Supply and demand are the market dynamics which affect the price of BTC just like other goods and services. Prices are likely to rise if there are more buyers than sellers or vice versa. Additionally, the price of BTC cannot be determined by any single entity, nor can it be traded in a single place. Each market or exchange determines the price on the basis of supply and demand. The various elements impacting BTC’s fee encompass the supply and demand for BTC, fierce competition from other crypto and news, price of manufacturing and regulation.
An event called Bitcoin Halving affects the price of BTC as the supply decreases while the demand increases. Due to the increasing demand, the price of BTC will increase. Also, BTC was created with a hard cap of 21 million units. As a result, miners will no longer receive new BTCs for confirming transactions once this limit is reached and what will determine BTC’s value will instead be its real-world applications.
BTC faces opposition from altcoins like Ethereum (ETH) and memecoins like Dogecoin (DOGE), making portfolio diversification appealing for investors. Any improvement of current crypto assets could decrease the significance and by extension, the price of BTC.
BTC mining costs encompass infrastructure costs, energy charges, and the trouble of the mathematical algorithm (oblique costs). The one of a kind tiers of difficulty within the BTC algorithms can slow down or accelerate the coin’s mining rate, affecting the delivery of BTC, which in turn influences its price.
Crypto regulations & guidelines are continuously changing, from nations like El Salvador accepting them as legal tender to China formally banning crypto transactions. BTC’s price may fall if there are issues concerning a specific government’s selection towards crypto and digital assets. In addition, regulatory uncertainty will create worry amongst investors, forcing them to liquidate their holdings and drag down the price of BTC.
Uncertainty about BTC’s intrinsic value and future makes it a highly volatile asset. Every day a decreasing amount of new BTC is mined as there is a finite supply of BTC. In order to keep the price constant, demand must match this rate of inflation. The BTC market is quite small compared to other industries, and media coverage alone can make the price go up or down. For example, news of Tesla’s willingness to accept BTC will increase its value or vice versa. So, given the high volatility, can BTC’s price go to zero?
Technically, it is possible. The price of BTC is not pegged to a fiat currency like that of the US dollars or other real asset; it is prone to depreciation. However, we have seen that algorithmic stablecoins like Terra USD can also cause market turbulence. However, for such a catastrophic event to occur in the case of BTC, many red flags, such as a sustained bull market will appear in advance. Additionally, BTC’s complex architecture is not easily destroyed. Its scalability issues, however, may be detrimental for its future. However, this does not mean that the price of BTC will suddenly drop to zero.
A sudden drop in BTC’s price will affect the price of other crypto assets. Many investors may simply exit the market to limit losses. Large institutional investors may be particularly at risk as they have made increasingly larger investments to diversify their portfolios.
Customer faith may reduce in a system that appears to be failing. This can impact crypto platforms like Coinbase & Binance, who rely on customers for transaction flow to generate revenue. Investments in these companies can also come to a complete standstill or decline significantly.
BTC is rallying to regain support at $20,400 after hitting an intraday low of $19,309 on July 5 as bulls and bears battle for control of the market. Crypto bear markets are notoriously painful. As a result, with widespread weakness continuing, most of BTC’s so-called “tourists” have now left the room, leaving only the most dedicated incumbent.
However, as the saying goes, it’s darkest before dawn. Despite BTC’s ongoing struggles, numerous metrics propose that the outlook isn’t as dire as a few are predicting and that the hodler base of the crypto marketplace stays strong. Especially with institutional investors amassing $51.4 million worth of investment products last week that offer exposure to drive down the price of BTC (BTC).
Disclaimer : This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in crypto assets viz. BTC, BTC Cash, Ethereum etc.are very speculative and are subject to market risks. The analysis by Author is for informational purposes only and should not be treated as investment advice