Bitcoin has had a good run rising from less a dollar to trade around $6000 – $7000. The history of its price contains series of up and down points on the price curve. its price has been very volatile considering the fact that there are many factors that determines it. It is possible that each factor affects the price differently, however; the one which affects the asset largely change the price.
Firstly, Bitcoin price is determined by demand and supply. In economics, the interplay of demand and supply on a resource or commodity determines its price. When the demand of Bitcoin increase in the market, the price rises, and vice Versa. On the contrary, when the supply of Bitcoin decreases, the price rise since the shortage created causes consumers to willingly pay higher price for it.
Bitcoin price is also largely determined by government regulations. Throughout the Bitcoin history, it can be said that most of its market drawback was attributed to unfavorable government regulations.
Recently, the struggling in the price of Bitcoin was due to the cryptocurrency crackdown ordered by the Chinese and the Korean government. The price responds positively to favorable government regulations which causes more investors to enter the market.
The price of Bitcoin is also dependent on the institutional acceptability. Over the years, experts have predicted a price boom for the cryptocurrency based on the possible increase in acceptability by institutions. JP Morgan recently launched a payment method based on the Ethereum blockchain. This and many other measures causes a price rise in cryptocurrencies.
Competition from other cryptocurrencies also affects the Bitcoin price. When investors find the competitor coins more worthy of investment, they may go in for them which will cause their price to rise whiles the price of Bitcoin falls when all other factors are made equal.
Also, One of the price determinants of Bitcoin is Media hype and Intuition. The earliest spike in the price of Bitcoin was as a result of the many positive reports in the media, influencing investors to purchase it. Just as the media had a large contribution in its price rise, the media can as well cause the price to drop through negative reports.
One other price determinant which is probably a minor force affecting the Bitcoin price is intuition. Most investors base their investment decision on their intuition. The direction of the intuition of the majority affects the price.
