Opinions

Bitcoin Price is Driven by Fundamentals

Bitcoin introduced to the world over a decade ago had worth less than a U.S dollar in the very beginning. In a span of 10 years period, the first cryptocurrency of the world has come a long way before becoming the world’s largest cryptocurrency by market cap. Now, bitcoin is worth several thousand U.S dollars.

The significant jump taken by bitcoin has made it an extremely attractive investment for many. In addition to that, the volatile nature of bitcoin has added charm to the asset class as people are looking forward to maximize their profits by investing in bitcoin.

Under these circumstances, crypto investors and enthusiasts waiting for a bull market run are highly dependent on the fate of bitcoin’s price in order to make massive gains. Thus, the criteria upon which the price of bitcoin changes becomes immensely significant to understand and comprehend.

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Bitcoin is the world’s first truly decentralized digital currency which is not under the control of any authority. The price of bitcoin obeys only the fundamentals of supply and demand. Whenever the supply of bitcoin exceeds its demand, the price of bitcoin drops. Similarly, if the demand for bitcoin increases than its supply, the price of bitcoin rises.

Unlike any other stock or asset whose price can be manipulated, the price of bitcoin strictly follows the fundamentals. As at any given time the demand and supply of bitcoin can vary randomly, this explains the volatile and unpredictable nature of bitcoin.

What sets bitcoin apart from other assets is that while sentiments regarding other assets can often lead to a rise or fall in their price, the price of bitcoin will be only be affected if there is a change in its supply or demand. This explains why the price of bitcoin can’t be manipulated like assets such as stocks or other currencies including fiat.

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In 2017, the price of bitcoin reached its all-time high (ATH) while revolving around $20,000 mark. As bitcoin supply is likely to reduce following bitcoin halving, a phenomenon where bitcoins awarded to miners are cut to half, the price of bitcoin is expected to rise in the future. Let’s see if investors who have been waiting long for bitcoin to achieve a new ATH are able to witness it after halving scheduled in 2020.

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Fatir Malik

Electrical engineer by profession, turned into blockchain developer. Fatir contributes regularly with his insights about latest developments in fintech sector. Contact the editor at editor.opinions@blockpublisher.com

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