How much is Bitcoin worth today?” That is a question that goes through every crypto investor/trader’s mind every day. It is an important question as the value of Bitcoin can have far-reaching consequences on the overall crypto market through its sheer popularity. And it is a good question because the value of crypto can vary a lot at any given time.
The very first valuation that anyone gave to Bitcoin was in 2009 when 1 BTC was announced as being equivalent to $1309.03. And the absolute peak that Bitcoin has seen in valuation was last year when it reached a valuation of $65,000. At the moment of writing this, the valuation stands at $34,000
But what drives this value? Why is it that there is so much variation in the valuation of Bitcoin as a cryptocurrency? What drives this volatility? In this blog, we will look at these factors that affect Bitcoin valuation. And we will also tell you where you can buy bitcoin in Pakistan.
Four Factors That Influence the Valuation of Bitcoin
Supply & Demand
Bitcoin is no exception to the universal economic law of supply and demand. Let’s take a look at the 3 principles of the Law of Supply and Demand before moving forward.
The law of demand states that the higher the price is, the lower the demand will be.
In contrast, the law of supply states that the higher the price is, the more there will be to sell that economic good.
And the third principle is created when the first two principles merge. It states that together, these two principles determine the volume of goods in the market and, subsequently, their value in said market.
But how does all this apply to Bitcoin? There are two aspects of Bitcoin that are influenced by the principles of supply and demand:
Demand: The Bitcoin mining process is inherently designed to slow and become harder over time as more and more Bitcoins are mined. This phenomenon is known as Bitcoin Halving and has been a part of the Bitcoin blockchain source code since the beginning. With the popularity of Bitcoin and cryptocurrency in general on the rise, the demand becomes higher. But in comparison, the process of producing Bitcoins is slowing rapidly. This creates an imbalance that leads to a rise in the prices of Bitcoin.
Supply: When Satoshi Nakamoto designed the blockchain infrastructure of Bitcoin, he “hard-capped” it. Hard capping is known as limiting the potential supply of a cryptocurrency. For example, Ether coin can only ever have a maximum of 90 million coins produced. And in Bitcoin’s case, there can only ever be a maximum of 21 million Bitcoins in circulation. Not one coin more. So, once that cap is reached, there will be no more coins to mine for, and miners will be rendered obsolete. Once that happens, then the everyday usage of Bitcoin will determine its market value.
Cost of Production
We’ve all heard of Bitcoin mining. It was mentioned in the previous paragraph. The mining process is essentially just a computer solving a complex mathematical equation. And when the equation is solved, the miner is rewarded with one Bitcoin.
As more and more become involved in mining, the process will become more and more difficult. And it will also become costlier and require more complex equipment. This can also have an impact on its valuation.
Bitcoin’s Competition
Though it is the most well-known cryptocurrency in the world, it is definitely not the only one. And there are other cryptocurrencies that are beginning to rival Bitcoin’s popularity. Ethereum and Dogecoin are two of them.
As the crypto space gets crowded by more and more cryptocurrencies. People will look to them to balance any discrepancies they might have in their crypto portfolios. This competition keeps Bitcoin’s valuation grounded and doesn’t let it shoot into the stratosphere.
Media Presence
Media coverage has a huge impact on the valuation of not just Bitcoin but all cryptocurrencies. The more attention a cryptocurrency gets, the more people will try to buy into it. And for cryptocurrencies that are already saturated like Bitcoin, negative media attention can drop their valuation to where it can hurt financial portfolios all around the world.
Conclusion
The cryptocurrency market is maturing slowly. And as that happens, the market will become more stable, and the more volatile factors will diminish. But still, Bitcoin, just like fiat currencies, is and will always be affected by social and geopolitical factors around the world.
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