The crypto-market is volatile, and therefore, it has to face a lot of fluctuations. In the last few months, the price of Bitcoin has been changing from rising abruptly to facing days of bearish trends.
The important point to consider is; what are the driving forces and parameters that guide the price of Bitcoin in the market? There is a difference between price and value. Price is regarded as the rate of exchange in comparison with other coins, and the value means the usefulness of Bitcoin.
There is a total of twenty-one million Bitcoins (21M), and not all of them are in circulation every time, and they are manufactured based on logarithm release function. Bitcoins are being used as a currency, value transmission, and market commodity.
The five drivers behind Bitcoin price are; supply-demand, media coverage, political process, changes in regulations, and Bitcoin forks
Major Factors Driving Bitcoin Price
Supply-demand is always a crucial parameter to determine the price of any commodity and the major market trends are being guided by this factor. The rule of thumb is that if the supply remains constant and the demand increased, the price would increase.
Media coverage creates curiosity among the general public, and they started searching for Bitcoin; thus it plays the role of influencer. Positive media coverage creates positive sentiments among the users of Bitcoin, and they started investing more in this segment. Negative media coverage can cause depreciation of the price of Bitcoin.
The third important factor is the political process that shapes the Bitcoin price. Inflation in Venezuela and the economic crisis in Greece are the most prominent examples in this regard where people heavily invested in Bitcoin because of the bad economy and political turmoil in their respective countries.
The loophole in the crypto-market was lack of regulations and non-recognition by the governing authorities. Bitcoin is not issued by any government so far, but they have recognized this digital currency. The recognition has now influenced many users to use Bitcoin on a wide scale.
Bitcoin has incorporated many advanced features in it, and the original Bitcoin is now split into Bitcoin cash, Bitcoin gold, etc. This has also influenced the price of Bitcoin.