What factors affect the price of Bitcoin? How to value Bitcoin?
In the currency circle, everyone knows about Bitcoin. It can be said that all investors enter the currency circle from the contact with Bitcoin. Investing in Bitcoin can make some people rich overnight, and of course, some people lose their money because of Bitcoin. So, what on earth affects the price of Bitcoin? How can we value Bitcoin? Next, let's have a look.
What factors affect the price of Bitcoin?
1、 Bitcoin supply and demand
Similar to the concept of supply and demand in the traditional financial system, when the supply of Bitcoin market exceeds the demand, the price of Bitcoin will fall; When demand exceeds supply, the price of Bitcoin also rises. However, the difference is that the inflation rate of the traditional financial system will be affected by the financial units of various countries. The central bank will control the rise and fall of the exchange rate of legal tender through fiscal policies, but it is different in digital currency.
Friends who understand the concept of Bitcoin must know that decentralization is the core concept of digital currency. Decentralization means digital currency that is not controlled by any single organization or team. Its currency price fluctuation mainly depends on market change. In addition, most Bitcoin are now controlled by large enterprises or a few people, so as long as he throws a large number of Bitcoin into the market, No matter how the value of Bitcoin is, it can make the currency price soar.
Conclusion: Since the supply and demand of the currency market are not limited by any regulatory unit and standard, and most Bitcoins are in the hands of a few people, the currency price is easy to rise or fall wildly due to large transactions.
2、 Bitcoin halved
One of the factors that affect the price change of Bitcoin is related to the system of halving Bitcoin.
The mining of Bitcoin relies heavily on the miners to provide a lot of computing power and electricity for mining. However, the halving of Bitcoin has a direct impact on the profitability of the miners. When the halving occurs, the number of Bitcoin available for the same workload and cost is less than before, resulting in a decrease in the supply of Bitcoin market. Finally, the change in supply and demand is reflected in the change in the price of Bitcoin.
The halving of Bitcoin has occurred three times so far. In view of the previous experience, whenever the halving occurs, the price of Bitcoin will definitely rise, although it may not be reflected in the currency price immediately. Because of the investor's prediction psychology, the price of Bitcoin will generally rise early, which may be one of the inevitable factors that the halving of Bitcoin has had an impact on the currency price.
3、 Star effect
Sometimes the rise and fall of Bitcoin can cause a sharp rise or fall in the price of Bitcoin just because of one person's words, and this effect is related to investors' belief in these currency market celebrities. The best example of star effect is Elon Musk, president of Tesla.
In May last year, the price of dog coins soared just because of Musk's words, "SpaceX will bring dog coins to the moon." Then a few days later, Tesla announced that because of concerns about climate warming, it suspended the purchase of Tesla's payment function with bitcoin. It was reported that the price of bitcoin fell by 17%.
In addition to a word from Musk that can affect the price of Bitcoin, Ethereum founder V Shen, Twitter founder Jack Dorsey, etc., are known for the rise and fall of the price of Bitcoin. Therefore, if you want to judge the rise and fall of Bitcoin prices, these celebrity communities also play a crucial role. For friends who want to invest in Bitcoin, Xiao Bian suggests that you can register a Twitter account to care about their new community dynamics.
4、 The rapid development of the exchange
At the beginning, Bitcoin could only be obtained by mining, and there was no channel for currency transaction, so the liquidity and supply/demand ratio of digital currency were not good. However, this situation has gradually changed with the rapid development of centralized digital currency exchanges.
5、 The Appearance and Prevalence of Shanzhai Coins
Bitcoin is the leading currency in the world of digital currency. The rise and fall trend of bitcoin can even be compared to the market index of the stock market. It can be seen that bitcoin has a high position in the world of digital currency.
However, since the emergence of Bitcoin in 2009, other currencies with Bitcoin as the core have emerged one after another, such as Ether, Lite, etc. Although these counterfeit coins are not as famous as Bitcoin, they have to some extent become substitutes for Bitcoin. When the price of Bitcoin is too high, investors may be worried about the foam of Bitcoin, so that they will turn their investment targets to other developing and potential counterfeit coins. The demand for Bitcoin will indirectly decrease, and the price will also decrease.
How to value Bitcoin?
There are three specific ways to value Bitcoin:
1. Metcalfe valuation method: This method can be used to estimate the upper and lower limits of Bitcoin network by combining Odlyzko's law. However, using this method to value Bitcoin is actually overestimated, which is about 30 times higher than the actual value.
2. Credit currency valuation method: From the perspective of the payment function of Bitcoin, if the total amount of legal currency is calculated by M1, its value is about $3.0 billion to 3.6 billion. Assuming that the application scale of BTC can reach 10% of the legal currency, it can be estimated that the overall value scale of BTC is about $0.3 billion to $3.6 billion, and then divided by 21 million, it is about $1.4 million to $170 million/BTC. If the global total M2 is about $90.4 trillion compared with the total M2, the BTC price will be about $430000 if the ratio is 10%.
3. Gold valuation method: The actual price of Bitcoin depends on the amount of gold reserves targeted by Bitcoin. Assuming that the total market value of Bitcoin is compared with the market value of the official gold reserves of the global central bank, the price of Bitcoin alone is about 75000 dollars. If you compare the value of Bitcoin with private working capital, the price of Bitcoin can reach 160000 dollars. If you compare the value of artworks (jewelry), the price of Bitcoin can even reach a surprising 400000 dollars.
Speaking of this, I believe you have a certain understanding of the factors that affect the price of Bitcoin and how to value Bitcoin. In general, Xiaobian also reminds investors that no matter whether they are investing in Bitcoin or other currencies, they must fully understand and analyze the risks before entering the arena, and do not invest blindly.