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Factors that have influenced Bitcoin’s value in recent years

By Guardian Nigeria
21 July 2022   |   7:00 pm
Bitcoin is one of the largest cryptocurrencies in terms of market cap. Unlike traditional currencies, this digital asset is not issued by a central bank or backed by the government. Also, for investors, purchasing Bitcoin is different from buying a stock or bond because this electronic asset is not a corporation. By using this method,…

Bitcoin is one of the largest cryptocurrencies in terms of market cap. Unlike traditional currencies, this digital asset is not issued by a central bank or backed by the government. Also, for investors, purchasing Bitcoin is different from buying a stock or bond because this electronic asset is not a corporation. By using this method, one can easily invest in bitcoin crypto at Bitcoin Profit because there is a simple buying process and no formality required. This virtual asset acts more like a commodity used to store value, so the following factors have influenced its value in recent years.

Social Media
The value of this virtual currency is popularly known to change as a result of the social media hype. Ultimately, it works both ways since the news can lead to a price surge or drop in this electronic asset. More so, there is the impact of influential people among the Bitcoin community, such as Elon Musk, who influenced the DOGE coin value several times, despite meaning or not.

On the other hand, chaos characterizes social media, but people can find information there. For example, Bitcoin exchanges give updates from time to time on blockchain currency or inform about crypto scams. 

Scarcity
Theoretically, if there is a limited Bitcoin supply, the price will go up as fewer coins are available to buy. However, if 40% of the coins are in circulation and the rest of 60% is reserved, the price may decrease when more coins become available for buyers. Moreover, some Bitcoin projects burn existing coins by sending them to an unrecoverable address inside the blockchain. This way, they control the available supply. 

Regulation on Sales
With this electronic asset being a new asset, regulators have long debated how to classify it. Consequently, adopting a position on them can be difficult for governments. They are constantly changing regulations such as taxation, among other things. Since this electronic asset I decentralized, which means that it doesn’t tie to any specific central governments, the regulations can directly impact the value of this virtual asset because they apply to investors. In other words, if there is fear about a particular government decision or statement, it could result in the price fall of this virtual money. 

Today, the regulations imposed on this virtual money will differ significantly depending on how a country views the coin. However, in most cases, if the regulators have at least s neutral outlook on this digital asset, KYC and AML will be imposed on high-volume traders and investors. 

Bitcoin’s Competition
This virtual asset is easily the world’s most well-known and recognized cryptocurrency. On the other hand, other cryptocurrencies like Ethereum and Dogecoin are trying to fight for the public’s attention. The crowded space enhances further portfolio diversification. And this makes the playing field more appealing to investors. But because of competition, Bitcoin’s value can stay pretty grounded. Also, it’s safe to say that the price could look different if Bitcoin were the only cryptocurrency out there.

Cost of Production
Even though Bitcoin is strictly a digital asset, it is still a product that requires production. Mainly, the cost of production for this virtual asset comes from the mining process’s electrical consumption. On the other hand, Bitcoin mining is a process in which miners solve complex cryptographic math problems and get rewards in newly minted Bitcoins. Often, miners use a lot of electricity to solve this math problem, which goes into the value of this digital asset.

The Bottom Line
Generally, these are the most significant factors that influence the current value of this digital currency. On the other hand, it’s vital to note that this virtual asset is still in its early stage.