Let me help you to understand what determines the price of Bitcoin.

Let me help you to understand what determines the price of Bitcoin.

The regular ups and downs in Bitcoin prices dominate cryptocurrency headlines. While the value of Bitcoin has increased significantly since its inception, it goes without saying that there have been some setbacks along the way. However, what factors influence Bitcoin's price? What factors are causing the change?


• Why does the price of Bitcoin fluctuate?

• How does Bitcoin's limited supply affect its price?

• What factors influence Bitcoin's price?

Why does the price of Bitcoin fluctuate?

The simple answer is found in basic economics, specifically scarcity, utility, supply, and demand. Bitcoin's price is determined by supply and demand.

When there is more demand than supply, the price rises. Alternatively, when there is more supply than demand, the price falls. This is one of the most significant distinctions between Bitcoin and fiat currencies. While the government controls the price of fiat currency, Bitcoin's price is entirely determined by supply and demand economics.

Something is said to be 'valuable' if it is rare and useful to people. Consider gold, which is both rare and difficult to come by. It also presents a use case in the form of jewelry as well as an investment instrument.

Bitcoin is comparable to other commodities such as gold and oil. Its cost is determined by how much money someone is willing to pay for it. As a result, the price fluctuates over time, just like the prices of stocks, oil, and gold.

How does Bitcoin's limited supply affect its price?

Bitcoin's supply is limited to 21 million coins. Its scarcity has been obvious since its beginning. The number of Bitcoins created will decrease over time, reducing the market supply.

Aside from rising demand, one of the factors influencing Bitcoin's price over the last decade has been scarcity.

What factors influence Bitcoin's price?

As previously stated, the market determines the price of Bitcoin based on supply and demand. The concept is similar to calculating the value of a used car or a grain of gold.


The exchange rate between buyers and sellers who are dealing with one another affects the price of bitcoin. It also depends on how much buyers are willing to pay for the 'future value' of the bitcoin.

People are more likely to pay more for something if they believe the price will rise in the future. People pay less or do not consider purchasing an asset if they do not believe in it and have fear, uncertainty, and doubt (FUD) about it. As a result, its price falls.

The mainstream acceptance of Bitcoin and its technology has grown significantly. As more people become optimistic about Bitcoin's future and are willing to pay more for it, its value rises.

However, there are times when the Bitcoin price falls. People are likely to be concerned about the future of Bitcoin when there is political pressure, technical failure, or negative social media campaigns. For example, in May 2021, Elon Musk tweeted that Tesla would begin accepting Bitcoin once miners used more renewable energy. Elon Musk's statement caused a 15% drop in Bitcoin's price.

Regardless of the factors, one thing is certain: the more people who use Bitcoin, the higher the price will rise.

as always:

before you invest in crypto – invest in yourself