It is interesting to know that the first Bitcoin was created in 2009. From that year to this moment, this digital currency has been associated with different fluctuations, and these fluctuations could lead to extraordinary profit conditions for traders. Since there is no single price defined for Bitcoin, there is no compelling reason for the price of Bitcoin to increase or even decrease.
For this reason, Bitcoin is bought and sold at similar prices in different exchanges. Therefore, traders can predict the price of Bitcoin by using Fundamental Analysis or Technical Analysis. In the following, we will examine some of the various factors that can cause the rise and fall of the price of Bitcoin and changes in the value of this cryptocurrency.
The first factor: halving or halving the reward of Bitcoin mining
Every four years, for the purpose of controlling the supply and demand system, a process called halving is implemented. Accordingly, the reward of Bitcoin miners (the number of Bitcoins obtained in the mining process) is halved. The halving phenomenon was implemented for the first time in 2012. Experts and analysts believe that the phenomenon of halving can include the causes of the increase in the price of Bitcoin, and this theory indicates that the supply of Bitcoin is decreasing. Because it can lead to a decrease in miners’ activity. But in general, in relation to the decrease or increase in the value of Bitcoin, the halving phenomenon cannot be considered effective.
It is not bad to have hints about the number of bitcoins in circulation and its price.
How much bitcoin is in circulation?
The total supply of Bitcoin is limited by its software and will never exceed 21,000,000 coins. Its new coins are created during a process known as mining (using a proof-of-work mechanism): as transactions are relayed across the network, they are collected by miners and packaged into blocks. And they are protected by complex cryptographic calculations.
As a reward for consuming their computing resources, miners are rewarded for each block they successfully add to the blockchain. At the moment of Bitcoin’s launch, the reward was 50 BTC per block: this number is halved every 210,000 new blocks are mined, which generally takes approximately four years for the network. As of 2020, the block reward is halved three times and includes 6.25 bitcoins.
Bitcoin was not mined before the public offering, meaning that no coins were mined or distributed to the founders. However, during the first few years of BTC’s existence, there was relatively little competition between miners, which allowed the first participants in the network to amass significant amounts of coins through regular mining: it is estimated that Satoshi Nakamoto alone It has more than one million BTC.
Bitcoin mining can be very profitable for miners depending on the current hash rate and Bitcoin price.
The second factor: the quality of the supply and demand system
The supply and demand system can affect the price of most of the goods. This condition is also introduced as an important factor in determining the current price of Bitcoin. Therefore, in a situation where a limited amount of a particular product is available and the demand rate is higher, as a result, we will witness an increase in the price, and the opposite of this case can lead to a decrease in the price. This condition also exists for the Bitcoin cryptocurrency. For this reason, the supply and demand system is another factor that can create the conditions for the decrease in the value of Bitcoin.
The third factor: complexity and security in the blockchain system (block chain)
Another factor that can lead to changes in the value of Bitcoin is the safety in the blockchain system. Therefore, the more complex and secure this system is, the price and value of Bitcoin will increase. But when the safety and complexity of the blockchain system is reduced, it can lead to a decrease in the value of Bitcoin and create distrust towards it.
The fourth factor: understanding and information of society
Nowadays, due to the fact that the prosperity in the market of buying and selling Bitcoin is increasing day by day, but there are people who still do not have a detailed understanding and knowledge about digital currencies such as Bitcoin. Based on this, no matter how little information and public understanding is about the Bitcoin cryptocurrency, these conditions can also have a direct impact on the value of Bitcoin.
The fifth factor: media and social activities
Any condition that can be effective in changing the purpose and sentiments of investors can be effective in reducing or increasing the value of cryptocurrencies. Among these cases, we can refer to the speeches of managers of other companies, or officials of countries, or even famous people who are active in the digital currency market. These issues can cause doubt and ambiguity in the way of traders’ activity. In this case, the phenomenon of FOMO (Fear Of Missing Out) will occur and in the future, due to the fear of losing capital, it will cause a lack of risk-taking towards the activity of investors until it forces them to sell their digital currencies in the shortest possible time. sold to withdraw their funds from the market.
An example can be mentioned in the speech of the CEO of Facebook. Mark Zuckerberg Mark Elliot Zuckerberg raised the issue of security and reliability in Facebook’s digital currency called Libera in the US Congress, which led to a decrease in the price of Bitcoin.
The sixth factor: legal restrictions
Since after 14 years, there are still no single and precise regulations for transactions, buying and selling of Bitcoin and other digital currencies in countries, and each country follows its own policy. This factor refers to the strictness and legal restrictions of property and taxation in governments.
Because this issue can encourage people to hide their assets and have a direct impact on the amount of demand and ultimately lead to a decrease in the price of Bitcoin. Like the restriction imposed by China on activists and investors in 2017. Based on this, the price of Bitcoin experienced a 40% drop.