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The main cause for the fluctuations in the price of bitcoin is that it is a highly volatile currency that is driving people crazy. Still, no one has understood what on earth is determining the prices and why people are afraid to invest in it.
If you also want to know all this then you have come to the right place and here are some advantages of using bitcoin. Here we're going to break down the exact cause of why you shouldn't be doing it.
By the end of this blog post, you will know how significant it is for you to understand all those factors and how it gives you bitcoin value and what makes its value up and down. Below in this blog are the 4 significant key factors that determine why the bitcoin price keeps on rising and falling.
Media and competitors
The news given by the media is affecting the prices of cryptos a lot. If any negative event takes place in the market or there is any change in the market conditions then crypto prices may fall. On the other hand, if good news is received, investors start feeling very excited, due to which its prices see a rapid rise. The news determines whether investors can feel excited or fearful. The effect of the news on competition is very obvious. For instance, the successful Ethereum merger also resulted in considerable price fluctuation for Bitcoin. The value of Bitcoin may eventually decrease as a result of the competitors of Bitcoin becoming stronger through these upgrades. The bitcoin market may be negatively impacted by the introduction of new cryptocurrencies. even more so if they have publicized media attention.
Market Demand
The prices of cryptos affect their demand in the market, which includes bitcoin. Bitcoin is a successful crypto and is also known as gold. This shows its high demand among the sections of investors such as increasing bitcoin demand and increasing price. This, combined with limited supply and high demand, has been playing a part in making bitcoin a scarce asset, with this scarcity resulting in a significant increase in its value.
Rules and Regulations
Both rules and regulations have a great impact on the price of cryptocurrencies and bitcoin. The introduction of a large economy to trade with digital currencies, and restrictions on minting, appear to have a significant impact on the prices of these currencies. Banking channels were banned in India in the year 2018 on crypto platforms, as a result of which their prices showed a sharp rise. After the same ban was imposed, bitcoin sales appeared to increase 1.5x in a day, while the price dropped by 10%. On the other side, the value of cryptocurrencies rises when laws are favourable and could result in greater usage of crypto assets.
Blockchain Protocol
Bitcoin is a cryptocurrency whose value is determined by the equity market. The blockchain protocol has its own set of rules that govern data sharing with computer systems. They also define how information is sent and received by users over the network. Each blockchain protocol for a crypto project has its consent method, making each protocol unique. A blockchain protocol's market value is more resilient the more robust it is. The degree of decentralisation, number of deployed decentralised applications (DApps), developers on the platform, and other factors all affect a protocol's strength. Although the protocol does play a significant influence in determining the value of a specific crypto.
Closing thoughts
Last but not least, users' sentiment is influenced by supply, competition, demand, and regulatory developments. In the end, one of the key variables that determine the direction of any cryptocurrency's price changes is investor mood.