Factors That Determine the Value of Bitcoin

Factors That Determine the Value of Bitcoin

Nowadays, most people have realized how profitable trading with bitcoins is. Actually, people do not want to keep on using the conventional or traditi

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Nowadays, most people have realized how profitable trading with bitcoins is. Actually, people do not want to keep on using the conventional or traditional way of trading with the normal currency. In fact, they are using bitcoins, which are termed as virtual currency, in buying and selling.

To some extent, people end up buying bitcoins for investment purposes. If the bitcoin price increases more than the buying price, then traders decide to sell them out in order to make profit. This is actually a lucrative way of investing since many people are making supernormal profits by holding bitcoins and later selling them when prices rise.

Bitcoin being a profitable kind of investment, the big question is what determines its price or value. These 3 pointers below explains this:

First of all, the scarcity of bitcoin can greatly affect its value. The amount of bitcoin released in the market is limited. This means that it can get depleted at some point due to the forces of demand and supply. When people hold bitcoins hoping the prices will rise at some point, the supply in the market definitely goes down. So this means there will be a high demand of bitcoins in the market, hence prices going up.
Secondly, the growth of certain security features can affect the value of bitcoin. Most people believe that trading with virtual currency, such as bitcoins can easily be taken out of an e-wallet. Such beliefs can never be understood whatsoever. So, this triggers the development of security features to help protect bitcons, which have been placed in a wallet and therefore fear in people starts to fade away. This means that many people will be interested in trading bitcoins, hence affecting its value due to the forces of demand and supply.

Again, the manner in which bitcoin miners distribute bitcoin also affects its value. Remember that demand and supply takes effect only if those willing to buy bitcoins can actually do so. Bitcoin miners can only help in moving bitcoins by processing transactions. Bitcoin can only maintain a good level of value only if there is steady access to reliable transactions.

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