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What affects the price of Bitcoin

Some insights on what affects the price of Bitcoin and other Cryptocurrencies. Why does a Bitcoin priced on it's current price - and what is the intrinsic value of Bitcoin


The price of Bitcoin seem to keep rising and a lot of people outside of the community of this "Cryptocurrencies" are most of the time confused to why and who dictates the price of Bitcoin. Some experts on TV claims it's a bubble and it has no intrinsict value; But then, the price of Bitcoin seem to keep on rising and leaves people more confused.

Intrinsic Value of Bitcoin

Controversial figure, John Mcafee, founder of Mcafee Antivirus argues, against financial figures that says Bitcoin has no intrinsic value. The argument goes that Bitcoin's intrinsic value comes from the processing power that is used to create Bitcoins, through the process often referred to as mining.

Mining is commonly thought by newcomers as free way to get money, but nothing is further from the truth, it requires very large amount of processing power, which includes the equipments used (specialized processors called asics, or graphics card and other compoontents), the massive amount of power consumed, the management, which according to Mcafee costs around 1000$ per Bitcoin.

This 1000$ to create 1 Bitcoin as estimated by John Mcafee is the minimum price the Bitcoin should be. But most of the time, the price of Bitcoin is so much larger than this, why is this so?

Free Market Dictates the Price

When we say "Bitcoin price", it is referring to the last trade price on the market, it's the price of which someone agreed to to buy at, from someone who agreed to the said price.

In simple terms, it's like you yell on the crowd of people, the market "I have 100$, wanna buy 0.01 bitcoin at 10,000$/bitcoin!" and then someone on the crowd replied "Ok we have a deal! Give me your 100$ and I'll send you 0.01 Bitcoin", except that it is happening at large volume, meaning it happens multiple times per second and with $ so big. Those that want to sell at 11000$ will ignore you the time you shout or shout "I'm selling at 10500$, maybe you like that?". Those that are buying at 9500$ may compete with you and shout "I'm buying at 10300$/bitcoin!".

That's a free market. No single entity or a single "Bitcoin company" dictates how much a price is worth. When there's a lot more willing buyers than willing sellers, the prices goes up, and when there's more willing sellers than willing buyers, the prices goes down.

That's why when traditional media like TV gives more exposure to Bitcoin in a positive way, new interested buyers enter the market, driving the price up. The opposite happens when the TV gives negative exposure, it makes the previous buyers, specially those that lacks education about the subject sell often for a loss, making the sellers exceed the buyers, making the price go down.

The Market - Trading Platforms
If you are very new to such financial jargons, the word market may confuse you, but in reality, it's simple, the market is just the websites that are facilitating trading between the buyers and sellers, often for a small fee on each trade. The usual exchanges today are centralized, meaning they hold your Bitcoin for you, since this is digital, they should be very careful with your Bitcoin and other cryptocurrencies, because if they're hacked and yours and other users funds get stolen, then it'll be almost impossible to be taken back because of the nature of the blockchain and cryptocurrencies.

That's why if you ever get into cryptocurrencies, it's important to be on a trusted platform. One of the trusted Cryptocurrency exchange loved by many is Binance, Binance is one of the most advance platform around, and it has plenty of other cryptocurrencies in it (also called as altcoins). Below is a referral link for Binance

Sign up to Binance


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