If you are a regular crypto trader and you buy Bitcoin with a credit card, then you must have wondered why the value changes. Bitcoin is one of the largest cryptocurrencies in the world. It has launched in 2009, and it is based on blockchain technology, which manages all transactions. The value of one Bitcoin is in Lakhs (INR), which is shocking as initially, its value was very low. The sudden boost in the value of Bitcoin is the main reason behind huge investors.
Moreover, it has even increased the USD to BTC exchange within a few years. So, why should you know this? Will this help you as a trader? Yes, by understanding the functioning of Bitcoin you will be able to predict the prices precisely. Moreover, experts can predict the rate, as they have in-depth knowledge of the currency.
In this blog, we will discuss various reasons due to which the value of Bitcoin changes frequently. These factors are the basic reason behind the change, you may even find more factors for the change.
Supply Demand chain
Before we jump into Bitcoin, let us understand the functioning of a currency by a country. Do you know how the value of a currency is determined? Well, it is determined by the federal bank. If the federal bank increases the amount of currency in the market, then the value of it decreases. On the other hand, if the demand for currency increases, then the value goes up.
One example of this is USD, in the present world, the demand for USD is high. Most of the trades are done in USD, due to this, the value of the USD is very high. The currency of every country is usually controlled by an organization. However, this is not the case for Bitcoin. No authority can control its value. This is the reason that Bitcoin remains unaffected by an economic recession, government schemes, and many more.
The value of Bitcoin depends on the supply-demand chain. If a large number of people buy Bitcoin at the same time, then the value of the currency will suddenly boost up. However, if a large number of people sell out Bitcoin at the same time, then the value of the currency falls suddenly.
Do you know that Bitcoin has introduced the term mining in the market? Do you know what mining is? Do not worry. Let us understand this first. Mining is the process in the Bitcoin blockchain system, in which highly powerful miners(computers) try to find blocks of Bitcoin. These miners are paid by the system as per the number of blocks they discover in the network. It also depends on the number of Bitcoins mined and the value paid to the miners. The higher the amount paid to miners, the higher the value of Bitcoin.
The value of the Bitcoin also depends on the regulations by the government and trading platforms. There are some countries in the world, which have banned Bitcoin. Before investing in Bitcoin, you need to make sure that the government allows you legal trading of Bitcoin. Moreover, the value of the Bitcoin also depends on the platform you choose to buy Bitcoin. Every platform has different exchange and trading fee. You need to choose a platform that offers services at an affordable rate.
Is it safe to invest in Bitcoin?
If you are looking for a safe place to invest, which can give you large returns, then you must surely invest in Bitcoin. However, you need to make sure that you invest in Bitcoin through a genuine platform, as it prevents the chances of fraud or data leak.