Bitcoin is certainly the talk of the town in the work of cryptocurrencies. This was the first coin to be created as it came into existence in 2009. It started with a value of 1 cent per coin and by 2010 it was already at the $1 mark. The price has skyrocketed to as high as over $64,000 in the first quarter of 2021. The fluctuation and remarkable rise of Bitcoin prices have made the market volatile. There are so many factors that have contributed to the changes in the market. Different charts and graphs have presented the changes in the prices.
In 2021, Bitcoin seems to have settled at about 50% of the price. There have been different arguments about the reasons for the volatile nature of Bitcoin. The inelasticity of the demand of the coin is the one that mainly causes the sudden movements. Irrespective of the direction the Bitcoin price moves, there seems to be a constant demand for the coins. In the last bear market, the price of Bitcoin seems to have hit a new high of about $64,000 sometime in April. However, in the last few weeks, the prices have gone to a new low of about $30,000.
So with the sharp increase and decline in Bitcoin prices, one may wonder what affects the prices. Let us look at some important details that cryptocurrency traders need to bear in mind.
Cost Per Transaction
One of the most important things to note is the cost per transaction. It is worth noting that in the past, Bitcoin has experienced 3 bear markets. There was a price decline of 93%, 83%, and 82% respectively. The constant factor in all these bear markets is that they happened right after a spike in the cost per transaction. In 2020, the cost per transaction spiked from $25 to $250. This made the bull markets to shy away from trading until the costs dropped and remained low for a while.
Daily Transactions
The other factor to take note of is the volume of transactions on a given day. When you look at bitcoindigital.io, you will realize there is no clear relationship between the Bitcoin prices and the daily trading volumes. From 2013, there seems to be an effect on the number of transactions on the Bitcoin prices. Where the volumes started to decline, there has been a decline in Bitcoin prices. In recent months the prices of the coin seem to be on a downward spiral.
Difficulty Levels
Last, but not least the difficulty is another element that cannot be ignored when it comes to Bitcoin prices. This refers to the calculations that are needed for a computer to create a new coin. About a decade ago, a computer needed to perform about 10 calculations to mint a new coin. Currently, to produce a single coin, it is estimated there are over 25 trillion calculations. This makes it quite expensive as there will be a lid placed on the new supply of coins.
How Bitcoin Affects other Crypto Coins
If you are a keen crypto trader, you will notice that the Bitcoin price trends tend to affect all the other coins, including Ether. In some cases, it is even worse as a fall in the price of Bitcoin may cause a further drop in other coins. Conversely, when the Bitcoin prices rise, the other coins tend to rise even higher. This means that you cannot afford to ignore Bitcoin even if you are holding other types of coins.
Bitcoin and the entire cryptocurrency world are still new and are gradually becoming popular. Certainly, there is a whole lot of learning and observation to do. We hope that this article has shed some light on the different elements affecting Bitcoin prices.
