Bitcoin (BTC) is a digital currency. It does not have the stamp of any official or government organization, as opposed to fiat currencies such as the euro, dollar euro, yen, and euro. To create, store, and transfer BTC dispersed networks that include cryptographic protocol and users are needed. Investors perform their transactions on their own instead of making use of an intermediary. Peer-to-peer networks remove trade restrictions and simplify commerce. Satoshi Nakamoto proposed the first cryptocurrency in the world in 2008, and it was first launched in January of 2009. The number of companies accepting Bitcoin is growing daily, giving it a market value. However, this digital money has been hindered by security problems and fluctuations.
A variety of factors affect the price of Bitcoin.
Bitcoin’s Price and Demand
Bitcoin has caught the attention of both retail and financial institutions. The demand is fueled by the increase in coverage by media and investment “experts” and business owners extolling the value Bitcoin has and will continue to have. Bitcoin has also gained popularity in countries with high inflation and currency devaluation like Venezuela. It is also well-liked by those who utilize bitcoin to send large amounts of money to engage in illicit and illegal transactions.
This implies that the shrinkage of future supply has paired with the increase in demand, which has helped increase bitcoin’s value. But, the price fluctuates during alternating periods of fluctuations and booms. For instance, a rise in Bitcoin’s price in 2017 was followed by a low that lasted for a long time, followed by two significant inclines and declines until 2021.
News and information about the competition
BTC competes with altcoins such as Ethereum ( ETH) and meme coins such as Dogecoin ( DOGE), which makes portfolio diversification attractive to investors. Any improvements made by the current cryptocurrency could push BTC’s value lower, in contrast to a different situation in which Bitcoin was the only digital currency. Because of the media’s reports, you might want to purchase crypto assets with an optimistic outlook and avoid the ones with a questionable future.
How Competition Affects Bitcoin’s Price
Although Bitcoin has the distinction of being the largest and most widely-known cryptocurrency, hundreds of tokens are competing for investment dollars. By 2022 Bitcoin will have the majority of trading on the cryptocurrency market. 4 But the dominance of Bitcoin has diminished over time. As of 2017, Bitcoin was responsible for more than 80 percent of the total market value in the cryptocurrency market. In 2022, that percentage dropped from 50 to less than 5 percent.
The primary reason behind this was the increased awareness and the capabilities of alternative currencies. For instance, KuCoin has emerged as an impressive rival to Bitcoin due to a surge in decentralized finance (Defi). Investors who believe it has the potential to revolutionize the financial rails of today’s infrastructure have made investments in Ethereum (KCS) for transactions through its network. KuCoin is responsible for about 10 percent of the total market capitalization of cryptocurrency markets.
Regulations and Bitcoin’s Price
Bitcoin was created following an economic crisis triggered by loosening the rules within the derivatives market. The cryptocurrency is unregulated and has earned a name for its regulatory and border-free exchange system.
The lack of regulation for Bitcoin is a plus and minus. This means that it can be used worldwide and isn’t subjected to similar restrictions imposed by governments as other currencies. However, governments and other interested organizations are pushing for cryptocurrency regulation. Establishing a regulatory framework is a matter of time, and the implications it will affect Bitcoin’s value are unknown. In the United States, cryptocurrency rulings made through the Securities and Exchange Commission (SEC) will affect the price of Bitcoin. In October 2021, Bitcoin’s price increased to $69,000 just a few days after SEC authorized the first U.S. ETF that was bitcoin-linked: The ProShares Bitcoin Strategy ETF (BITO). But, just a couple of months after achieving the price of $40, Bitcoin was hovering at $40,000.
What happens If Bitcoin’s value plummets to zero?
If BTC price falls to zero value, that could affect the value of another cryptocurrency. This means that some investors may decide to remove (completely or significantly) to lessen losses dependent on the type of investment.
Large institutions could be especially at risk since increasing numbers have invested more significant amounts in diversifying their portfolios. The most vulnerable would-be investors who recently made investments at higher prices or on crypto derivatives might need to liquidate other assets to satisfy the margin requirements.
The trust of customers could be eroded by the system, which appears to be failing in the wake of a crisis that has affected cryptocurrency companies such as Coinbase, Binance, and others. They rely on their customers’ transactions for revenue and investment funding to increase. These investments could even cease altogether or drastically decrease. Furthermore, the companies might not be able to hire, pay, or draw the employees needed to operate and grow.
