My name is Rhys, a first time dad blogging about my adventures and experiences of being a parent. [email protected]

How the bitcoin’s value gets determined

You all know that bitcoin is booming in this digital world because the digital world exists because of bitcoin cryptocurrency and other currencies. But many people think someone is controlling or affecting the value, but some people do not know behind the price of bitcoin. So if you are curious about learning the value determination of bitcoin, Bitcoin Trader can do all about the updated value and price of bitcoins.

Bitcoin is not regulated by the government.

You have to understand that any third party or government has not regulated bitcoin, and I know you will ask that El Salvador is the country that makes bitcoin a legal tender. They are regulating bitcoin and making it the currency to use like fiat. But you have to understand that the government can only restrict the features of bitcoin and create their own different rules such as taxation, building their exchange to track the transactions, etc. Still, they cannot issue bitcoin or cannot control the value like fiat currency. So it is clear that bitcoin is not issued or controlled by the government but can only do so through external restrictions.

How does it work?

Bitcoin’s process is different and came into existence so that the people could have complete control over their money without taking the consent of the government, banks, or any other financial institutions. Bitcoin has not been issued by the government or any central bank of the country; that is why the government cannot control the value. In the case of fiat currency, the country’s central bank can increase or decrease the supply of the currency by issuing fewer notes, and the demand will automatically increase, which will increase the value and inflation. Still, it is not possible in the bitcoin cryptocurrency. Other factors highly affect the value of bitcoin, which is not fixed. That means no one controls whether it increases or decreases the value of bitcoin.

Factors that determine the value of bitcoin

There are the following factors that determine the value of bitcoin given below:-

Demand for currency:- There may be many reasons for buying bitcoin that increase the demand, and if the demand rises, the rise in value will be the by-product. If you think anyone controls the demand, you are wrong because demand depends on people’s belief system around bitcoin. If you think that bitcoin is more valuable than fiat currency, a significant investment, and it will increase my reputation, then people will start buying, and the more people buy, the more the price will get high.

  1. Role of supply:- If the demand is high and supply is higher than the demand, it will not create high value. You know that plenty of cryptocurrencies are available in the market with supply in billions, and there are no pre-set rules or protocols for mining; hence the value is meager. But bitcoin has pre-set rules or protocols created at the time of launching so that the value will increase according to the demand over the period. Now there is eighteen million bitcoin in supply, according to the market report and the total limit to reach out is twenty-one millions bitcoin.
  2. Government restrictions:- The government is stringent around cryptocurrency because they know they cannot control it, and people will misuse the currency if they don’t act against it. So the government starts taking action and creating policies regarding cryptocurrencies to limit bitcoin transactions, which also affects the value. For instance, in India, people heavily trade in bitcoin and make tons of money. Still, now the government has restricted it so hard by applying the tax system and set of rules, and people have started selling bitcoin, decreasing its value. 
  3. Competition:- Bitcoin was the start of the digital world in 2008, but now there are different cryptocurrencies available and continually coming that are creating competition. Ethereum is known as the second bitcoin because it is the only currency with high value after bitcoin, and people are also heavily investing in bitcoin. However, Bitcoin users are also investing their money in other cryptocurrencies if they see an opportunity encouraging them to withdraw from bitcoin and invest in other currencies.
  4. Trending News:- If the good news is going viral about the bitcoin cryptocurrency, then people will show more interest and fear of missing out; they start immediately buying the bitcoin that pumps the value of bitcoin in minutes. If there is awful news about bitcoin going viral, people start selling, and the price drops.