Bitcoin BTC

About Bitcoin

Bitcoin is a digital or virtual cryptocurrency first created in 2009. It uses peer-to-peer technology to facilitate instant payments and transfers without the need for any central banking authority.

Each bitcoin is a computer file stored in a digital wallet belonging to an individual and can be exchanged between parties. All bitcoin transactions are verified by network nodes and recorded in a public distributed ledger, known as a blockchain.

You can use bitcoin to buy certain products and services, although only a handful of businesses currently accept it as a currency. However, it is now moving more towards the mainstream and showing a growing influence as big financial firms endorse it. For example, Mastercard recently announced it was to start supporting select cryptocurrencies directly on its network. PayPal has also announced it would allow its customers to buy and sell bitcoin alongside other digital currencies on its platform.

Bitcoin launched in 2009 and is the world's first and largest cryptocurrency by market capitalization.

• The currency is created, distributed, traded and stored with the use of a decentralized ledger system, known as a blockchain.
• Bitcoin's value has been volatile, reaching $10,000 in 2020, now trading at $50,000.
• Bitcoin is divided into a cryptocurrency unit known as a satoshi. A single satoshi is equal to one-hundredth millionth of a bitcoin.
• The currency was designed around the fixed supply of 21 million bitcoin.

What Determines Bitcoin’s Price

When compared with traditional stocks and commodities, bitcoin, like other cryptocurrencies, can be traded 24/7. As an investor in digital currencies, this gives you huge opportunities with the chance to buy and sell at any time of the day and access different options across various countries and time zones.

This also means there are increased risks as important market movements can take place while you may be asleep. Therefore, many investors opt for the technology to track differences in cryptocurrency fluctuations.

The price of bitcoin is based on market supply and demand, and which exchange the currency is traded on. When demand for bitcoin increases, the price increases and when demand falls, the price drops, too. As bitcoin is traded on multiple exchanges, these prices fluctuate as they are based on trades made by the individual traders’ orders on these exchanges at any given time. Any investors looking to buy or sell bitcoin will need to choose a particular exchange to use. The price will therefore change at any given moment based on the market conditions.

The price of bitcoin can be volatile due to the relatively small size of the market compared to other asset classes like stocks or bonds, and the ability of traders to buy and sell bitcoin rapidly.

Other factors also play a part in influencing the price, such as bitcoin halving. New bitcoins enter into circulation as block rewards, produced by so-called miners who use expensive, energy-consuming electronic equipment to earn them. Every 210,000 blocks, or roughly every four years, the total number of bitcoins miners can potentially win is halved. Bitcoin's most recent halving occurred on May 11, 2020 with the next expected to take place in 2024.

Price History

Bitcoin’s value has been subject to some volatility since it first appeared, with several rallies and crashes in the short time it has been available.

Bitcoin's price jumped from $1 in April 2010 to a $32 high in June, a gain of 3200% within three months. That steep ascent was followed by a recession in crypto markets and bitcoin's price fell to $2 in November 2011.

A major moment for bitcoin occurred back in 2017 when a fifth price bubble in its history occurred. The cryptocurrency was around the $1,000 price range at the beginning of the year but, after a short decline, it rose from $975.70 on March 25 to $20,089 on December 17. This movement gave bitcoin greater legitimacy in the eyes of authorities, regulators, investors and other stakeholders within the financial services.

Since the arrival of the COVID-19 pandemic, Bitcoin has continued to enjoy a rough, yet steady rise. It began 2020 at $7,200 and grew in value as investors became concerned about the volatility of the economy, as well as fears of a stock market crash similar to that of 2008. Bitcoin is now worth more than $50,000 and is continuing to rise in value.

Bitcoin Price Prediction

Bitcoin price predictions can be unreliable due to the volatile nature of the market.

Predictions for the future value of bitcoin vary based on who is behind the forecast. According to Jeremy Liew, a Lightspeed Venture Partners partner, Bitcoin could reach $500,000 in 2030.

The rapid liquidity of the bitcoin market can increase risk associated with trades of the cryptocurrency, and enhance its exposure to market drops or activity in the physical world. On the other hand, its value is also shored up by greater acceptance of the currency in the mainstream investment community. For example, earlier in the year, Tesla’s Elon Musk tweeted his interest in bitcoin, prompting a flurry of positive investor activity. Tesla announced it had bought $1.5 billion worth of bitcoin and would begin to accept the currency as payment for its goods.

There are ways to forecast asset prices, such as through fundamental analysis, technical analysis or stock-to-flow model. The latter measures the relationship between the currently available stock of bitcoin and its production rate. Technical analysis attempts to track and predict the price of bitcoin through historical records.

Price Volatility

Bitcoin’s price is notoriously volatile as it is such a young currency. However, it is thought to have been born out of a desire to negate the impact of the financial crash of 2008, and bypass the supposed fragility of the conventional banking system.

In the three months leading to January 2018, the volatility of the price of bitcoin reached nearly 8%. This volatility is driven by varying perceptions of the intrinsic value of the cryptocurrency as a store of value and method of value transfer. A store of value is the function by which an asset can be useful in the future and can be saved as well as traded with something in the future.

The ups and downs of the digital currency can also be attributed to the kind of investor it attracts. Speculative investing behaviour contributes to the fluctuations. At the same time, it also lacks any central regulator to help manage any volatility. By contrast, conventional stock exchanges have circuit breakers which halt trading during dramatic drops.