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BTC Price Explained
5 Factors That Affect Bitcoin Price
Back in 2009, it was possible to buy 1 BTC for merely a penny… But today it is worth thousands of dollars. Let’s get a better understanding of what actually contributes to the BTC price origins.
What determines Bitcoin price?
In no particular order, the first factor that affects Bitcoin value is…
Economics and politics
Similar to traditional assets, the price of BTC is greatly impacted by global economic and political factors: the overall state of the economy, political climate, consumer spending, total employment, news, etc. For example, as we continue to see more and more banks collapse worldwide, many regular users turn to the first-ever cryptocurrency as a safe haven for storing their holdings. In fact, BTC is currently in the top three most trusted assets on the market, alongside gold and treasuries, and is recognised by both professional and retail investors.
Supply and demand
Bitcoin has been around for years. During this time, it has proven to be a stable and safe asset. Today, BTC is used as a payment instrument for online and real-world purchases, investment for individuals and hedge funds, or simply a technological advancement that many people believe in. On the one hand, the demand for Bitcoin is growing. On the other hand, it has a limited market supply of 21 million. Thus, the rising demand for an asset with a restricted amount increases its final price.
Like gold, Bitcoin is a scarce resource that requires significant funds to excavate. Have you ever wondered how much it costs to mine 1 Bitcoin? For example, in the US, mining a single BTC may result in payments from roughly $17k to $62k, as of Q1 2023. The current BTC mining difficulty remains high, and Bitcoin prices are unlikely to go any lower than its production cost.
The Bitcoin blockchain is a stable and conservative network, and for most users, this is one of its key benefits. But, as with any other blockchain, it also gets updated. Thus, in mid-2017, the Segwit upgrade, designed to increase block space, led to a significant BTC price jump. Therefore, these network improvements — although rare — may have an impact on the price of Bitcoin as well.
Last but not least, to protect consumers, regulators try to come up with reasonable laws and policies as well as ensure a safe and protected environment for Bitcoin users in each country. As a result of some regulations, more people feel secure when using BTC as a means of payment, thus further boosting trust in Bitcoin and other cryptos.
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