Various factors that affect the price of Bitcoin include BTC supply and demand, competition from other cryptocurrencies and news, production costs, and regulation.
supply and demand
Anyone with an economics background knows the law of supply and demand. However, if you are new to the concept, let us help you understand. According to the law, the market forces of supply and demand work together to determine the market price and quantity of a particular commodity. For example, as prices rise and demand for economic goods falls, sellers will produce more goods, and vice versa.
An event called the Bitcoin halving affects the price of Bitcoin, just as the supply of BTC decreases while the demand for BTC increases. The price of BTC will rise due to strong demand.
Also, Bitcoin was created by Satoshi Nakamoto and has a hard cap of 21 million Bitcoins. That is, once the cap is reached, miners will no longer receive new bitcoins to confirm transactions. The four-year block reward halving may not affect the price of BTC at the time. What determines Bitcoin’s value will be its real-life application.
competition and news
BTC faces competition from altcoins like Ethereum (ETH) and meme coins like Dogecoin (DOGE), making portfolio diversification attractive for investors. Any upgrade to an existing cryptocurrency could lead to a drop in the price of BTC compared to a completely different situation where Bitcoin is the only existing digital currency. Because of media coverage, you may want to buy crypto assets with promising prospects and ignore those with uncertain prospects.
Cost of production
Bitcoin production costs include infrastructure costs, mining electricity costs, and mathematical difficulty (indirect costs). Various difficulty levels of the BTC algorithm can slow or speed up the production of the currency, affecting the supply of Bitcoin and, in turn, its price.
Cryptocurrency regulations are constantly changing, from countries like El Salvador accepting it as legal tender to China officially banning crypto trading. The price of BTC could fall if there are concerns about a particular government’s decision on cryptocurrencies. Furthermore, regulatory uncertainty will create fear among investors, further reducing the value of Bitcoin.