Understanding Bitcoin Price Fluctuations: What Triggers It?

While Bitcoin is today’s most traded cryptocurrency, its fluctuating price begs many questions. Something even more captivating is that BTC price fluctuates more than that of fiat currencies. And so, anyone who wants to buy Bitcoin will ask, does the price change matter? Let’s face it. It only makes sense to say, crypto investors in a country like Estonia would want to track BTC price trends.

If you are a Bitcoin enthusiast or an established cryptocurrency trader, this post is for you. In the meantime, you can use Buybitcoin24 to compare the best exchanges where you can buy or sell the crypto coin. Also, explore Local Bitcoin, especially how it makes BTC-fiat currency exchanges fast, secure, and convenient.

The following reasons explain fluctuation in BTC prices:

The Peg Effect and How It Influences BTC Price Fluctuations

Unlike fiat currencies such as the U.S dollar whose value is pegged on crude oil and other commodities, the value of BTC does not rely on any commodity. It means that no service or product defines changes in Bitcoin price fluctuations on leading exchanges such as Binance, Huobi Global, Kraken, and Coinbase. With this, you should then disregard a misconception that paying for goods using Bitcoin means its price is pegged on a commodity. Rather, you are paying for an exchange value associated with a fiat currency.

Moreover, with a clear understanding of what is Bitcoin, exploring the peg effect becomes easy. Take, for example, fiat currencies whose values do not fluctuate as much as BTC. If the value of fiat currencies would be changing frequently, it would trigger a precarious situation of economic imbalance. In the case of Bitcoin, high price changes equal both a tough buying and selling situation at the international market.

Bitcoin Prices Changes Dues to Demand and Supply

Another way of explaining BTC price fluctuations is by understanding the principle of demand and supply. While buybitcoin24 gives you a headstart in choosing the best value for your Bitcoins on an exchange, it is not an end in itself. Bitcoin traders should understand that getting the best value for their crypto coins depends on market supply and demand forces for BTC.

High demand equals high value on Binance or any other exchange. It is also true that low demand attracts low BTC prices on an exchange. The value difference between demand and supply determines its overall market value.

Sell-Buy Ration triggers BTC price fluctuations

To understand the sell-buy ratio, consider the difference between buying and selling price. However, there must be a set of Bitcoins for which a buyer and seller must determine a price via an exchange. A buyer and a seller start by quoting a price. The final price that bridges the gap is determined by an exchange such as Huobi that conducts the transaction.

Here is a good example. A seller quotes $500 for a set of Bitcoins and then the buyer negotiates the price down to $350. The overall price decided upon by an exchange such as Kraken maybe somewhere between $360 and $480.

Bitcoin trading Limit

Bitcoin posses a unique characteristic of having an imposed limit pegged on the number of coins. The current limit is 21 million Bitcoins and no more can be printed. It means a network can only hold up to 21 million BTC. Simply put, only demand is varied while the supply gets limited. A growing demand equals a huge Bitcoin hype. A decreasing demand translates to a low hype about the cryptocurrency.

The Bottom Line

In a nutshell, the frequent BTC price fluctuation is because presently, there is no universal global acceptance for the crypto coin. Thus, stabilizing its price can only change if more people in different parts of the world invest in Bitcoin. For now, Estonia remains a friendly cryptocurrency investment destination for anyone looking to buy Bitcoin globally.

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