Bitcoin is a digital asset developed in 2009 by Satoshi Nakamoto. This digital asset is like gold, but is only available in the digital world. Bitcoin itself includes crypto currencies that have exchange rates for other currencies.
But the popular one we know is a pair between Bitcoin (BTC) and United States Dollar (USD) or known as BTC / USD pair. The movement of Bitcoin prices from year to year shows fluctuations and even this is used by users to make Bitcoin as a trading asset like foreign exchange trading.
But the concern lately is that the price of Bitcoin is moving in very sharp volatility and the phenomenon of high price changes in a day is not surprising. Well, why did this happen? Why can BTC prices be very volatile compared to other pairs?
Yes, of course, significant growth is influenced by several important factors that support it. Well, in this article I will discuss what affects the price of the BTC / USD pair. Because knowing what factors influence the price of Bitcoin will open opportunities for traders to reap the benefits of a pair that is said to be the most promising word besides Gold (XAU / USD).
Well, below I will explain some things related to the rise and fall of Bitcoin prices:
Influence of prices due to Trader SpeculationPlease note that at this time the number of Bitcoin users who make it as more trading assets than those who actually use it as a medium of exchange. This is because the relevance of Bitcoin itself is still minimal, so that its use has not been spread and is familiar to the wider community.
Of course, for now we may find it difficult to find the nearest store that accepts Bitcoin payments and many users then prefer to use Bitcoin as a trading instrument in investment activities.
The main goal of traders is to benefit from the difference in the price fluctuations of Bitcoin, so they are the party that responds most quickly to a global issue.
Whether manifested in a buy or sell action, actions that are often speculative clearly have a big influence on the volatility of Bitcoin. News such as the refusal of a country to legalize the use of Bitcoin can have a bad impact, so it is not uncommon for Bitcoin traders to respond by opening sell orders.
Conversely, positive news such as the increase of large merchants such as Amazon who accept Bitcoin, can be welcomed by the purchase of large amounts of Bitcoin by traders.
Influence of prices due to Bitcoin Volume and DistributionAs a digital currency that is still relatively young, the volume of Bitcoin is still very small compared to other assets such as gold, especially conventional currencies such as USD.
At present the amount of BTC volume in circulation is still less than the USD, which greatly affects the movement of Bitcoin. To see the relationship between the two, we can first understand the basis of Bitcoin fluctuations that are really determined by supply and demand in the market.
If many people buy Bitcoin in large quantities, of course the price will rise sharply. But on the contrary, the value of Bitcoin can decline if many of its owners sell in large quantities. Well, because the volume of Bitcoin is not much and the circulation is uneven, the movement of Bitcoin is very sensitive to the actions of its holders.
When someone buys or sells Bitcoin in large quantities, then the price can immediately move extreme. If in the future the volume of Bitcoin increases and the distribution is evenly distributed, then the volatility will loosen by itself.
Influence of prices due to Fraud Involving BitcoinBecause of its great potential, many parties are not responsible and then make Bitcoin an object of new fraud involving investors. They will persuade potential investors to entrust BTC that is owned by the lure of growing profits on a regular basis.
Even if you see from cases of financial fraud that have hurt investors a lot, such a mode should be watched out. The first to third month may have a return shown, but next time you will have difficulty contacting the account manager.
In the end, the investment company disappeared without a trace by escaping all the money of its clients, including your Bitcoin. Cases like this occur a lot and of course have a negative impact on the price movements of Bitcoin.
Investors who do not know anything will spread the information that Bitcoin is a scam, even though the one who cheats them is a false investment company. If it's like this, then the level of trust in Bitcoin will dim and automatically trigger a decline in prices.
The real example can be taken from a large-scale fraud scandal carried out by the MyCoin company from Hong Kong.
How do Bitcoin prices grow?At the beginning, the price of Bitcoin was only worth 0.001 USD (2009). Well, from 2009-2013, there was no significant increase and prices only rose slowly with slight fluctuations during the 4-year period.
Bitcoin then attracted a lot of attention because of the Cyprus banking crisis that occurred in November 2013 and many Chinese people bought large amounts of BTC, making the price increase, but the increase did not last long.
And then in 2014, there was a DDoS attack on the Mt. Gox, which at that time controlled around 60% of Bitcoin transactions, caused this price to drop by 40%. In 2014-2015, because the incident continued to make the price of Bitcoin fall.
During 2015, Bitcoin gained popularity slowly but firmly, and prices began to rise little by little. Only in 2016, Bitcoin has gained the trust of many people and the price has continued to increase. And in 2017 until the beginning of 2018 the price of Bitcoin continues to rise sharply even to reach 500%.
But in 2018, the BTC experienced a fluctuating decline, but over time, in 2019 BTC again showed its fangs and increased again. Because the changing value of BTC is very volatile, many traders are interested in trading on this BTC / USD or investing BTC.
There are a number of factors that influence the travel of Bitcoin prices, including the Total Bitcoin and Holder amount. The maximum number of total Bitcoin is 21 million, even though it is produced in stages. At present there are around 16 million BTC and more than 14 million people have wallets with BTC.
Because the number of Bitcoin is fixed, the more people who want to have it, the price will continue to increase. In addition to the amount / volume of BTC, the "Supply and Demand" factor on the market also affects BTC price movements.
Actually the physical market and the digital market are always influenced by the basic laws of Supply and Demand. If the offer is more than the demand, the price will go down. Vice versa. In addition to these two things, news also greatly affects price movements.
Lots of news that can affect market sentiment in the crypto currency market. For example, the news about the arrest of Ross Ulbricht, the operator of the Silk Road site that uses Bitcoin, made the price of Bitcoin drop by 25% at that time.
What is Bitcoin support?Bitcoin has no support in the physical world. That is, Bitcoin is not supported by precious metals such as gold or silver and international agreements, but even so BTC has all the characters that money has, such as:
UniformityAll Bitcoin are the same. No one can distinguish one Bitcoin from another. Every BTC has the same value and price.
RecognitionEveryone can easily distinguish Bitcoin from other crypto currencies. Bitcoin users also have a lot, so this crypto currency can be used to buy or sell goods and services, or to pay for college fees and raise donations.
DivisibilityEach Bitcoin can be divided into small parts. These small pieces of Bitcoin are called satoshi, with a value of 1 satoshi = 0.00000001 BTC.
PortabilityIndividuals can carry money or make transactions easily.
LongevityBitcoin is eternal. That is, the existence of Bitcoin is not limited to the system, but will exist as long as technology users still exist.
SecurityBitcoin is protected from counterfeiting, theft and changes in transaction information, through the protection of the Blockchain system.
What Will Happen at Bitcoin Prices?It is very difficult to predict exactly what will happen with the price of Bitcoin in the future. Any currency can be the object of collapse. In history, we know that there are a number of devalued and collapsed currencies, such as the German Papiermark or the Zimbabwe Dollar, and later the one that is critical is the VEF (Venezuelan Bolivar) currency.
In a short time, the price of the currency drops almost zero so that the currency is not used anymore because the price of goods and services increases rapidly disproportionately and uncontrollably. Technically and Fundamentally, for now BTC prices tend to be stable and generate profits for investors and traders involved in it, while the factors that influence it are:
The Bitcoin factor is likened to 'Gold' (valuable Crypto)Bitcoin is digital gold because many people equate Bitcoin investment with Gold. Here, we equate BTC with gold attributes. Gold is very difficult to mine, very rare and expensive and the same gold calories have the same value anywhere in the world, large pieces also have expensive prices and small pieces have lower prices.
At present, Bitcoin mining is becoming more expensive because the price of computer components (VGA) is very expensive and not in line with revenue. Not only that, many people are already interested in Bitcoin and too much demand than supply. It is undeniable that the future of BTC is very positive.
Acceptance Factors from the communityMany large companies accept Bitcoin as a means of payment. Not far away, the Hublot luxury watch makes a watch that is specifically sold with Bitcoin.
In America, people can buy cars, apartments and even coffee with Bitcoin. Companies like Bitpay make it easy to shop at large supermarkets abroad. You could say in a few more years, maybe crypto currencies, especially Bitcoin and Ethereum will be very popular to use.
Psychological FactorsBitcoin prices are also driven by psychological factors. Inventors, in particular, are affected by market sentiment from other investors or people around you.
For example, your office partner has bought 1 BTC but you haven't and the BTC price is increasing, you must be thinking of buying BTC because you will benefit.
This feeling is actually due to pressure from office colleagues and a desire to profit. The power of psychology is what will make the price of BTC increase.
Government regulation factorIt cannot be separated anymore that government regulation is very important. The government can make the gold money illegal or legal.
Small countries clearly will not interfere with prices, but large countries such as China, Japan, the European Union and America can make prices that change very sharply.
For example, for example, America will not accept Bitcoin and consider Bitcoin as a terrorist currency, so if news like this can come out, make sure the price of Bitcoin will drop, maybe there will be no price at all.
Conversely, if they issue news such as: being able to buy all goods with BTC and the country recommending BTC, then the price of BTC will rise and stabilize.
Market sentiment factor "Whale"'Whale' here is not interpreted as a whale but a very rich person plays in this market. Whale here can also be compared to 'sovereign', they can buy BTC with hundreds of millions USD.
Even though they are very few in number, maybe 3-4 people, they have made demand in the crypto market. If you look at the chart, there will be an upward line and a green color. 3-4 people vs. many people who buy only hundreds of millions of rupiah, of course ordinary people will lose.
When ordinary people feel the price will be higher, they immediately buy with lots and prices will soar even higher, this is when the whale will sell their BTC and prices fall again.