Various factors affecting the price of Bitcoin are supply and demand for BTC, competition from other cryptocurrencies and news, production costs, and regulation.
supply and demand
People with an economics background know the law of supply and demand. However, if you are unfamiliar with the concept, let us help you understand it. According to this law, the market forces of supply and demand work together to determine the market price and quantity of a particular commodity. For example, if the price increases, demand for an asset will decrease and sellers will produce more of it, or vice versa.
A phenomenon called the bitcoin halving affects the price of bitcoin, for example, in a situation where the supply of BTC decreases while the demand for BTC increases. Due to the higher demand, the price of BTC will move upwards.
Furthermore, Bitcoin was created by Satoshi Nakamoto with a hard cap of 21 million BTC. However, once this limit is reached, miners will no longer receive new bitcoins to confirm the transaction. The four-year block reward halving may not impact the price of BTC at this point. The things that will determine Bitcoin’s value will be in its real-world applications.
competitions and news
BTC faces competition from altcoins like Ethereum (ETH) and memecoins like Dogecoin (DOGE), thereby attracting investors for portfolio diversification. Any upgrade from an existing cryptocurrency could drive the price of BTC down, as opposed to a completely different scenario where Bitcoin was the only digital currency in existence. Because of the media coverage, you might want to buy crypto assets with a positive attitude and ignore those with a shadowy future.
cost of manufacture
Bitcoin production costs include infrastructure costs, electricity fees for mining and the difficulty of the mathematical algorithm (indirect costs). Different levels of difficulty in BTC’s algorithms can slow down or speed up the currency’s production speed, which affects the supply of Bitcoin, which in turn affects the price.
Cryptocurrency regulations are constantly changing, with countries like El Salvador officially banning crypto transactions by accepting them as legal tender for China. BTC’s price could plummet amid concerns about a specific government decision against cryptocurrencies. In addition, regulatory uncertainty will create fear among investors, which will further reduce the value of Bitcoin.