What is Bitcoin
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What is Bitcoin?
Bitcoin is a digital currency that was invented in 2008 by a group of unknown people using the name Satoshi Nakamoto. Bitcoin is the world’s largest cryptocurrency by market capitalization. It is prevalent among traders who like volatility.
Bitcoin has seen significant rallies and crashes since it started trading. It is one of the most successful blockchain-based cryptocurrencies in the world. The popularity of Bitcoin triggered the launch of hundreds of other virtual currencies, such as Ethereum, Ripple, Tether, etc. All of them are collectively known as Altcoins.
The decentralized network of users controls Bitcoin, and any other central banking authorities do not control it. The process by which new Bitcoin is released into circulation is known as Bitcoin mining. Bitcoin mining is a process by which computer programmers discover new blocks that are added to the blockchain. Bitcoin mining adds, as well as verifies, transaction records across the network.
Volatility in Bitcoin
Most traders and speculative investors like Bitcoin because of its volatility and price action. For example, at the beginning of 2017, the Bitcoin was trading near $1,000 at the end of the year 2017. The Bitcoin closed at $19,000. The net change for the year was over 1400%.
What moves Bitcoin’s prices?
These are the top factors that influence the price of Bitcoin
- Supply and Demand
In other fiat currencies, Bitcoin also complies with the laws of supply and demand. There is a fixed maximum number of Bitcoin. If demand increases, the prices of Bitcoin shoot up because of limited supply. Prices fall when demand decreases.
- Media Influence
Various studies held in the past suggest that media plays a significant role in influencing the price of Bitcoin. Because of larger media coverage, the news related to Bitcoin spread rapidly, so positive media coverage leads to a rise in price. On the other hand, negative media coverage leads to a fall in the price of Bitcoin.
- Political events
Events can influence the price of Bitcoin. However, the effect of any political event on the price of Bitcoin is the opposite of what happens to fiat currencies. A lack of belief in the country’s economy can lead to a fall in the traditional currency, which can cause a sharp rise in Bitcoin prices.
- Regulatory changes by governments
Bitcoin is a decentralized form of currency and independent from the influence of central banks, which is a new concept. But sill governments can change regulations, which can have an influence on the system since they apply to investors.
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