Bitcoin was the first decentralized digital currency introduced to the world in 2009. The cryptocurrency utilizes blockchain technology to facilitate seamless peer-to-peer transactions without the need for intermediaries. It enables safe, anonymous transactions, and its value depends on the market.
Bitcoin has been on an exciting ride with numerous appreciation, and depreciation phases commonly referred to as bubbles and bursts in the crypto world. In 2011, bitcoin experienced an incredible increase in value and rose from $0.38 to $32 and then dropped back to $2. Halfway into 2012, the bitcoin value rose again, skyrocketing to $266 before returning to $50. On November 29, 2013, one bitcoin was selling for $1242, but the price dropped dramatically in April, reaching a little under $600 in August. 2017 was the ultimate climax when the bitcoin prices skyrocketed, one-coin selling at $20000.The prices have since gone down, and as of March 10, 2022, bitcoin was selling at $7900.
What Affects Bitcoin’s Price?
Bitcoin is decentralized and is not backed or regulated by the government. Therefore, inflation rates, monetary policy tools, and economic growth measurements surrounding and typically impacting a currency do not apply to cryptocurrency. Generally, Bitcoin is considered a commodity used to hold and store value and is therefore not affected by such factors. Here are some of the factors that influence the price of bitcoin:
Bitcoin Supply and Demand in the Market
Like any other commodity, the price of bitcoin is influenced by supply and demand more than any other factor. This means that the number of coins in circulation directly impacts the value of each coin and how many investors are willing to pay for them. It is safe to say that bitcoin has drawn the attention of numerous investors, consequently increasing in demand. It has also become a popular commodity in countries with devalued currencies and high inflation like Venezuela. If the surge in demand continues to 2025, this might increase supply shrinkage, increasing the bitcoin’s price. However, these prices might still fluctuate in various booms and burst periods.
Bitcoin’s Cost of Production
The cost incurred in producing bitcoins is crucial in determining their ultimate price. Bitcoin production cost involves the total direct fixed costs of electricity and infrastructure needed for the mining process and the indirect costs that come with the advanced level of its algorithm. Bitcoin mining refers to the process in which miners solve complex cryptographic mathematical problems and are, in turn, gifted with freshly-minted BTC. Usually, miners might use up too much in the process, and the charges are incorporated into Bitcoin’s price. Generally, it might take at least 10 minutes to verify one block. However, more miners are joining every day, resultantly increasing the competition. Increased competition leads to more challenging math problems, and the miners may require more than 10 minutes to verify a single block.
Regulations governing the sale and use of the cryptocurrency
Despite being around since 2009, bitcoin is still in its infancy stages and is still considered a new form of asset. Therefore, regulators are still unsure of how to group this type of currency, which has led to constant changes in regulations like taxation and more. Laws vary depending on your country’s view on bitcoins. Usually, regulators with a neutral view of the coin impose at least an AML (Anti-money Laundering) and KYC (Know Your Customer) on high-volume investors and traders. That is why you need to take advantage of the crypto swap profits mastermind for a clearer understanding of all the dealings in the bitcoin and cryptocurrency market at large.
Bitcoin cryptocurrency is, without a doubt, one of the most popular assets to invest in today. The cryptocurrency market is characterized by a relatively low barrier making it easy for people to become crypto investors. Generally, different experts have varying thoughts on the bitcoin price projections. Some like Wallet Investor predict it will hit up to $150K in 2025. On the other hand, others, such as Digital Coin Price, have an optimistic yet more reserved prediction that the bitcoin price will have hit (only) $100 by 2027. But following the recent trends, it is safe to say that bitcoin is on the right path to $100k in 2025.
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Bitcoin: On-chain metrics to consider in this bear cycle before going…
The crypto market has had quite a ride this month after bearish waves struck down major cryptocurrencies. The global crypto market capitalization also fell below $1 trillion leading to failing crypto institutions such as 3AC and Celsius. Bitcoin also suffered heavy drawbacks during the period.
BTC reached its lowest levels since December 2020 after dropping below $17,750. Starting the month at around $32,200, the largest-sized crypto has taken a lot of heat and at press time, it was trading at $21,000. The king coin was up by more than 2% in the past day and was just down 0.05% during the week. This was a good signal of recovery after treading through bearish downturns early in June.
Nearing market bottom
On-chain data analytics platform CryptoQuant released the latest update surrounding Bitcoin. It stated that the current BTC price is undervalued. Most on-chain indicators indicate that we are close to a market bottom for Bitcoin.
BTC’s indicator of Net Unrealized Profit/Loss was hovering around -0.06, at press time. This is the initial signal for nearing a market bottom. In the latest crypto crash, there were many addresses that recorded losses when BTC reached the 18-month bottom of $17,744.
According to CryptoQuant, the MVRV ratio has fallen significantly during the current run. At press time, it was estimated at around 0.93, suggesting an undervaluation of BTC.
There was, however, a little spike in Miner’s Position Index but it was still estimated at -0.6. This means that miners are circulating more than their daily distribution in the moving average of the YTD.
Miners have also increasingly offloaded their holdings to exchanges. This can indicate that some miners’ revenue cannot meet the break-even point.
For many investors, this is a good time to start accumulating again if they want to recoup their losses. With the regulatory proposal for digital assets already in place in the United States, there is still hope for a bullish surge in the coming months.
Bitcoin Whale Presence On Derivatives Still High, More Volatility Ahead?
On-chain data shows Bitcoin whales are transferring large amounts to derivatives exchanges right now, a signal that more volatility could be ahead for the crypto.
Bitcoin All Exchanges To Derivatives Flow Continues To Show High Value
As explained by an analyst in a CryptoQuant post, BTC whale activity on derivatives exchanges still seems to be high.
The relevant indicator here is the “all exchanges to derivatives exchanges flow,” which measures the total amount of Bitcoin moving from spot exchange wallets to derivatives.
When the value of this metric spikes up, it means whales are currently moving a large number of coins to derivatives exchanges right now.
Such a trend usually occurs around lows in the price of the crypto as whales look to get themselves long positions.
Related Reading | Bitcoin Recovery Slows Down As Whale Inflows Remain Elevated
On the other hand, low values of the indicator show whales aren’t moving much coins to derivatives at the moment. This kind of trend has historically lead to tops in the value of the coin.
Now, here is a chart that shows the trend in the Bitcoin all exchanges to derivatives flow over the last couple of years:
Looks like the value of the metric has been quite high recently | Source: CryptoQuant
As you can see in the above graph, the Bitcoin spot to derivatives flow has spiked up recently, suggesting that whale activity is pretty high right now.
In fact, the current value of the indicator is actually the highest ever in the history of the cryptocurrency, implying there is an all-time high rate of whales on derivatives currently.
Historically, the price of the crypto has observed significant volatility whenever the metric’s value has been elevated.
Based on this trend, the quant believes that the value of the coin could still see further fluctuations in the near future.
The analyst also notes that a reduction in the all exchanges to derivatives flow will need to be there, for the volatility to die down.
At the time of writing, Bitcoin’s price floats around $21.1k, up 4% in the last seven days. Over the past month, the crypto has lost 27% in value.
The below chart shows the trend in the price of the coin over the last five days.
The value of the crypto seems to have surged up over the last couple of days | Source: BTCUSD on TradingView
After hitting a low of below $18k a week ago, Bitcoin has been trying to recover. So far, the crypto has managed to break above $21k again, but it’s yet unclear whether this recovery will last.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
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I’m Tony Spilotro. Behind the pseudonym, I’m a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck – literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn’t yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can’t yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.
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