The price of Bitcoin has a history of volatility, going all the way back to the days of the first purchase using the cryptocurrency — pizza.
In hindsight, it’s almost laughably predictable that the first, most elegant, functional cryptocurrency in history’s first purchase was of the best food in history (for computer programmers on a budget).
In fact, looking at the factors of what drives Bitcoin value we can easily see the “why” in almost every movement on price. Are you ready to see what determines the price of bitcoin for yourself?
Don’t miss out, keep reading!
The Price of Bitcoin in 2020
Bitcoin has come a long way in 2020, from $6965.72 on Jan 1 to the price of one Bitcoin reaching $26445.70 on Christmas day. It’s never been a more expensive time to buy and sell Bitcoin, but there will likely never be a cheaper time to buy-in from this point forward.
What happened in 2020 to cause the price to soar to such heights that even 2017 couldn’t touch?
The greatest factor has been the traditional institutional investment. PayPal and Cash App are buying more than 100% of the “virgin” Bitcoin from miners being minted. Publicly traded companies are and hedge funds are deciding to stream in massive amounts of capital.
Because Bitcoin is a non-sovereign currency, it means that it isn’t truly associated with any other asset classes. It’s a tool for diversification in a difficult time, that is, the pandemic.
It’s estimated that about 800 different institutional investors will own about 36% of crypto assets by the end of the year. Previous to this, it was only people with technical knowledge geeking out, true believers, first adopters, and a few amateur traders making big quick.
Of those institutions mentioned, only 97 of the 441 total USA institutions are actually exposed to crypto, with about half of European counterparts holding strong on Bitcoin and other major crypto players.
These institutions and individual investors see that Bitcoin serves as an excellent store of value with returns, among other factors.
What are those factors? Let’s get down to brass tacks.
Major Factors Hitting the Price of Bitcoin
While every individual buy or sell has an impact on the price, and Bitcoin whales are known to make massive waves, there are other well-known market-moving influences.
Bitcoin whales do change the price, but they come and they go and are not indicative of the Bitcoin price value or the health of the cryptocurrency. They are individuals or groups that have a lot of bitcoin and are moving it for their own reasons unrelated to the health of Bitcoin.
As Bitcoin increases in value, whales won’t go away, but they will play less and less of a major factor in Bitcoin price, so we’re naming them as a transient factor — not a major one.
What are the major factors?
- Overall Bitcoin supply
- Bitcoin Halving
- Institutional acceptance
- Regulation changes
- Public image and media coverage
- Bitcoin’s crypto cousins
Let’s cover them one by one to get a little more depth.
Bitcoin Supply and Demand
Bitcoin supply is fixed at 21 million coins, with fractions in the hundred million being the lowest denomination. This 8th decimal fraction of a Bitcoin is called a “Satoshi” after the creator, Satoshi Nakamoto.
While most of the bitcoin has been mined, that’s just to have enough to get optimum movement in the network. The true circulating supply of Bitcoin is less than 21 million because of lost wallets, unmined currency and more.
There are estimates that 20% of all existing tokens are lost, as of summer 2019. In the future, cracking those wallet passwords with uber-powerful computers may be like striking a gold-vein and having exclusive rights to it. For now, it drives the total price of circulating Bitcoin prices higher by scarcity.
The last Bitcoin is estimated (and slightly scheduled by the creator) to be mined in 2140. It’s likely, though, by 120 years hence, that the protocol will have been changed in one way or another that affects that estimate.
Why so long? That brings us to Halving Day.
Bitcoin Halving Day, a time when all enthusiasts celebrate as if it’s Christmas and wait for their holdings to rake in the cash.
Bitcoin Halving is a protocol in place in the Bitcoin network that keeps inflation down to minimal levels. Essentially, every time you slice a pizza, you don’t get more. You have the same amount of pizza cut into smaller slices.
The network keeps track of this and at times where there are getting to be too many slices on the network, it halves the reward of Bitcoins given to miners. This reduces the supply of Bitcoin from that point forward enough that it actually increases the value of the currency.
This is because demand actually grows with every Bitcoin on the market, to a certain degree.
Every 210,000 blocks mined, about every four years, the Halvening occurs. The last one was May 11th, 2020 where the reward for mining became 6.25 Bitcoins per block.
Because Bitcoin is a store of value much like gold, imagine if gold supply was cut every 4 years. Not the total amount already existing, but the new amount. Your computer, phone, and other electronics which rely on a steady supply of gold in its operation would skyrocket in price.
Even though miners receive less Bitcoin, the relative value of the Bitcoin remains high, and actually increases about 8 months after the Halving.
Media and Cryptocurrency
The media coverage of Bitcoin has driven public opinion massively from the start. The days of the silk road painted Bitcoin as an underworld currency of the likes of John Wick. However, the opposite couldn’t be more true.
Now the world is getting fed the idea that Bitcoin is digital gold (partially true) that everyone needs to invest in.
Even institutional investors are human and not immune to social pressure. But even more, media is spreading more accurate and more voluminous information into the hands of the public.
That includes also Ethereum, Bitcoin Cash, Bitcoin SV, Ripple, Tron, EOS, and other currencies. There are even cross-chain pass-throughs for Bitcoin to and from Ethereum and other networks. The interaction between all the cryptocurrencies will grow the value of all networks.
A rising tide raises all boats. The more and better information that reaches the public about cryptocurrency will only make the industry have a better reputation and trust.
Fortunately, cryptocurrencies are trustless systems. They like your trust, but they don’t need it.
The Price of Bitcoin Moving Forward
What is the price of Bitcoin going to be in 2021? Your guess is as good as ours. Ultimately the greatest factor of all is human.
The more people that are exposed, convinced, and able to participate in Bitcoin and other cryptocurrencies. Enjoy this comprehensive Bitcoin price influencer outline?
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