Most people would argue that the price of Bitcoin can not be predicted.
I believe that many of the elements that make up its price can be understood. Here, I present you with a list of these items.
The more you understand the fundamentals of Bitcoins, the better trader you become.
We all know that people who are willing to take the risk can make high profits or get rekt in an instant due to their high volatility.
I am more personally interested in Bitcoin & Co’s revolutionary potential and am proud to be a part of the decentralization movement. I must confess that I am intrigued by and driven by the values of Bitcoin and other Altcoins.
Why not. And why not.
New magical Internet money was invented and the possibility of undermining FIAT money was extremely excited for millions of people around the globe. Since its inception in 2009, Bitcoin has already grown by millions. No other commodity has done this in human history.
Some developers purchased 2 Papa John’s pizza back in the days for Bitcoin 10,000, the equivalent of $100 million today, enough to buy all the Italian pizza a year. This speaks to the imagination, it is no wonder that people are interested in Bitcoin In 2020 Bitcoin alone rose 22%. It has periods of correction, consolidation and sharp retrogression, of course. The most impressive uncontrolled commodity out there is when you zoom out.
The hard thing about the price of Bitcoin is to foresee something, and it gets harder every year.
Nobody can call the crystal BTC bowl, the Bitcoin oracle, and constantly calls correctly.
Here are all the elements which make up Bitcoin’s price. Understand all of these elements and you can predict the amount.
If this is possible, I am happy to answer another question at the end.
1. Bitcoin price Metrics.
The factors that affect the price of Bitcoin have increased over the years.
Since Bitcoin is a state-of-the-art blockchain application, the price is partly the result of complex tech processes.
Of course, the human factor will always be there; feeling.
And we have enough feeling in the crypto space. They are reflected, for example, in the Fear and Greed index.
Let’s break down Bitcoins to digestible components that everyone can understand. The only thing you need is some basic knowledge of blockchain and cryptocurrency technology.
Supply and Demand
The basis of an asset’s market price is supply and demand. Low demand, the price is going to decrease. High demand and so on. It’s like a real market where beautiful flowers are more demanded and more expensive. The market of Bitcoin is dominated by people who host the so-called Hodlers Bitcoin. The more people Hodl, the more rice the price, since the supply is less.
Flowers will continue to grow, as the production of Bitcoin mining will not. It will be stopped in 2140 when 21 million Bitcoins are mined. That is one of the beautiful things about Bitcoin and a major improvement in our current economic system’s never-ending silver printing presses.
Bitcoin has been used for many years to avoid monetary repression from its government in hyper-inflation countries like Argentina and Venezuela. A haven currency that proved to be the perfect hiding place for confiscated pesos. Nobody wants to have his money frozen immediately by any government or bank accounts.
The hash rate of Bitcoins is a metric that indicates how hard Bitcoin miners function. This refers to the number of electricity miners that the Bitcoin blockchain can be checked. The more power, the safer. The higher the rate, the more attractive the mining is and the better Bitcoin’s price prospects appear to be shortly.
Institutional money flowing in: Bitcoin & Futures trading
Here was a lot to do in 2019 about the real financial guys on the block beginning Bitcoin trading futures markets. The CME Group and BAKKT have recently adopted Bitcoin. It can be seen as the official entry point to the Bitcoin ecosystem for institutional money.
Technological changes that drive the adoption of mainstream
Bitcoin is still in the early phase of acceptance in the new technology lifecycle. For many who want Bitcoin to become a modern crypto payment network, the speed of transactions is an issue. In comparison, Bitcoin blocks are relatively small on their database compared to other blockchains.
So why not take off-chain transactions?
The Bitcoin lightning network does this. It is called a payment protocol for layer 2. Take payments offline, process them and later validate them once online by the blockchain. Improvements in such innovations to speed up adoption often affect the price of Bitcoins.
The Bitcoin miners ‘ reward is halved every 4 years. Logical thinking would conclude that this is a huge ingredient for another price rise. That’s right, but the history of halvings shows that only 1.5 years after having is reduced
For the next halving for 2020, a lower price around halving the time in May 2020 will lead to lower profits and difficulties for small miners and a lower price will stabilize or even decrease. If prices rise until halving in different circumstances such as the economic crisis, a further increase can be expected after May 2020.
Stock to flow ratio
I realize that I might have already lost you at this point. It’s becoming very difficult. Only 22 million Bitcoiners are onboard for a reason. Some smart people came up with a Bitcoin stock to flow ratio to make it even more difficult. It rhymes, but other than that, I generally get a headache as I try to wrap my mouth.
In a few sentences, the flow stock is the relation between total stock and annual production. The total stock of Bitcoin is 21 million and its annual production can be estimated. The result makes traders feel good because the ratio is rising, as the asset is scarce.
The Bitcoin Stock to Flow Ratio is Bitcoin’s numerical scarcity.
These are the most important elements for the price of Bitcoins that can be measured and calculated. Some of these elements can, therefore, be predicted more or less based on historical data. For example, volumes of last years can be predicted for counter trading in Venezuela.
But what if President Maduro leaves suddenly?
The global financial crisis, global events, destabilizing threads of conflict, ecological disaster, spreads of the virus. To what degree do they affect the price of Bitcoin?
Regardless of the result, they all share one element. Such events can not be expected.
Bitcoin & The Corona Virus
There is approximately the same number of arguments that the virus made Bitcoin’s price increase, and arguments that the outbreak had little or nothing to do with its price. The premises are as follows:
- Many people in China have to stay at home, have more time to trade.
- There is social and economic turmoil, the haven aspects of Bitcoin come into play.
- The Chinese New Year has been canceled in many countries. Traditionally, Chinese retailers sold their crypto in this era. This was not the case this year, around 24 January. This means lower supply, and prices will increase.
- Many events such as underground fundraisers of Crypto have been canceled. This would have a negative impact.
An important element of the virus and its long-term influence is its possible effect on the production of bitcoin mining.
The disease may limit growth in Hashrate Bitcoin if the situation is not resolved shortly because expanding or building new machines would become difficult. 66 percent of Bitcoin mining worldwide is conducted in China.
During the more active period of the virus in recent weeks, the price of Bitcoins has increased significantly. This makes it likely that the virus had an impact, but very difficult to prove.
Even if you can predict a world event, you can take it into your trading strategy.
Possible US-IRAN War and Trade War with China
A potential war, especially economic, is destabilizing. A true war will affect the price of Bitcoins in the medium and long term. I don’t think the threat alone would affect Bitcoin so much, real measures are needed.
Citizens have become insensitive with the response to traumatic events in the world.
Only the real thing will increase the level of uncertainty and greatly influence the price of Bitcoins. The murder of Iranian General Soleimani led to sensational headlines and muscle play. After a few days, it all returned to normal.
US-China Trade War
In general, geopolitical events affect the price of Bitcoins. When the US-China trade war cooled down in August last year, Bitcoin dropped to $10,5k at the same time as the stock markets recovered. This is what Peter Schiff tweeted the last day.
Now that trade tension with China has eased, the pressure on the yuan is off. Those who bought Bitcoin to speculate on Chinese safe haven buying, which never happened, are taking their chips off the table. But with Bitcoin it’s much easier to put your money in than to cash out!
— Peter Schiff (@PeterSchiff) August 13, 2019
Other Crypto influencers tweeted that the Bitcoin price-Trade correlation was very weak or not existent.
I will argue again that, in all these geopolitical events, something really out of the ordinary will occur would lead people to panic, fear rates increase and a Fiat outflow to a spike in Bitcoin prices.
This is all about fear and the media feed this fear. With the overload of information, people need to deal with every day, another crisis is just another crisis. Nonetheless, a true virus makes people scared and panic. But not when after a few days it disappears in the newspapers.
This makes me believe that the media itself has one of the greatest effects on Bitcoins since human emotions are the principal price driver of Bitcoin at the end of the day.
Overall, the mainstream media reports on Bitcoin negatively. Another possible reason why’ just’ 22 million Bitcoin believers are still around the world. You could also say: Who owns the media, has the world, including a huge amount of influence on the price of Bitcoins.
Wait, one element we forgot. One of them for the future. An ecological disaster can also be added here. When Wallstreet gets inundated with rising sea levels in 2060, be sure that the share markets and thus the price of Bitcoins will be affected.
3. Wales & manipulation
Headlines in the media are very visible. One of the main reasons for Bitcoin’s high volatility is what hides underwater is the so-called whales.
Whales are hundreds of millions of dollars of revenue. Hedge funds, billions which Berserk himself got and perhaps President Xi Jinping of China (who knows?). Hedge funds.
Wales is loading up the price with several hundred million dollars and dumping it when all people have embarked on because of the notorious FOMO; Fear Of Missing Out. The reverse is also possible. Dump the dip you caused yourself and buy it. It’s highly manipulated. But hey, who still thinks it isn’t manipulated by Bitcoin?
Because whales are in the deep blue dark shade, they are invisible to the normal eye. They have become an essential component of the Crypto industry. Only when you carried out your technical analysis did you think you controlled all this, waited for weeks for your pattern to take place, a large whale sprang up and crashed the trade.
My conclusion is that taking all these elements into account, it is impossible to predict the price change of Bitcoins even in a very far distance.
Even when Trump decides to hit the Red button, when two tribes go to war and declare their war with Iran, the volume of Jonny goes into Hollywood classics, the next day a big whale can push the price in another direction nobody expects.
But the hint comes here. The only thing that we know. The price of Bitcoin will continue to rise.
In short. In short. The network has proven to be robust, the technology exists and has proven itself over 10 years.
The planet is becoming profoundly insane and fraudulent, triggered by human action. It needs to lead to more problems and instability. Hundreds of millions of people will buy Bitcoin when Bitcoin reaches the mainstream adoption phase. This is very likely to happen.
Blockchain and Bitcoin technologies have their roots in a reliable system. There were no people who needed to mess it up. This alone gives me the confidence that Bitcoin will remain.
Unfortunately, we are seeing more and more chaos around us, downward anarchy, division, crises, and disasters. Instead, computer networks will only grow and be safer.
In an increasingly dangerous world, Bitcoin will be a real monetary haven. It will continue to rise in price.