What Affects the Price of Bitcoin?

by Andrew McGuinness  //  jun. 29, 2018

Bitcoin took a while to reach the heights it’s been enjoying lately. From its establishment in 2009, it has come a long way. But what exactly has allowed bitcoin to reach the status that it has today? What has happened between 2009 and now to create this overwhelming growth and success for bitcoin? Here are 8 of the most paramount reasons for why the price of bitcoin has changed from its first development, and will continue to change.

1. Institutional investors

Bitcoin has a healthy share of investors around the world that have allowed it to gain its greatness, but institutional investors have also contributed greatly to its success.

Financial institutions like Nasdaq’s Swedish Exchange, Goldman Sachs, and JP Morgan are all playing their part by providing a cryptocurrency payment network for their customers or by using products compatible with bitcoin. A likely reason for this may be the fact that many customers own bitcoin and were frustrated by the lack of options available to them. Now that these banks are the first to have gotten on the bandwagon, they will surely be gaining quite a few more customers looking to fulfil their Bitcoin needs.

2. Tight government regulations

Government regulation in China and South Korea concerning the sale of cryptocurrencies is tighter than ever. However, this doesn’t seem to have fazed its investors. The strict regulation of these countries has only caused the demand to become greater. It really is true, not being able to have something is enough to make some people want it even more.

Because of this tight regulation, as well as the limited amount of cryptocurrency available to Chinese and South Korean investors, the price of bitcoin and other digital currencies is much higher. In fact, bitcoin is said to have reached a trading price of over $6,000 in China. When considering the other government regulations that are applied in Asia, this limited access to cryptocurrency comes as no surprise. Cyprus, however, is restricting the sale, trade, and usage of cryptocurrency as well.

The recent bank crisis suffered by Cyprus caused the government to see no alternative to seizing funds. Upon hearing about this possibility, and losing all hope in centralized financial institutions of Cyprus, citizens soon withdrew their money and used the bitcoin platform as an alternative bank. They felt that it was safe, or at least safer than anything with government affiliations. Because of this chain of events, and the sheer amount of people who began investing money in bitcoin for safe-keeping, many wondered whether bitcoin would be a viable option as Cyprus’ new currency.

3. Japan

Fairly recently, as of fall 2017, Japan has officially recognized bitcoin as “legal tender”. This means it is now seen as a legal method of payment, despite the fact it has yet to earn the label of currency and is technically still only seen as an asset. As of September, there are 11 companies in Japan that provide the exchange of digital currency. Another 17 companies are currently under review by Japan’s Financial Services Agency (FSA). Japan is now seen as an epicenter for bitcoin.

Conclusion

There are several factors to be kept in mind when considering the price of Bitcoin and the financial patterns it may observe in the future. These are, of course, factors impossible to predict, and for the most part out of our hands. Events concerning places in the world we haven’t even considered may affect the price of Bitcoin. On the other hand, large, well-known investors will obviously affect the price of Bitcoin as well.





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