Ian Mausner guides bitcoin traders to identify the factors influencing the price of a bitcoin

Bitcoin is a virtual currency that creators developed a decade ago. The central bank issues a traditional currency that people use, but Bitcoin is different. It is a digital currency, the recordings of which are available in the blockchain. Purchasing bitcoin is not the same as investing in the share market. People who invest in cryptocurrencies such as Bitcoin acquire ownership of cryptocurrency, says Ian Mausner. The digital currency has nothing to do with the government, thereby does require following the monetary policies of the same. The supply chain in the currency market and the demand for security determine the price of a bitcoin.

Here are a few factors that influence the price of a bitcoin

Since Bitcoin is not a traditional currency, it ignores the financial policies of the government. Therefore, the economic graph and the inflation rates do not determine the price of Bitcoin. The cost of cryptocurrencies such as Bitcoin is affected by the following factors

Competition with other tokens

Although Bitcoin is one of the most renowned cryptocurrencies, other digital currencies continue to battle for the users’ attention. Many people feel that there is no competition between Bitcoin and other tokens as it is the supreme option to capitalize, points out Ian Mausner. However, other digital currencies, such as altcoins, are in close competition with Bitcoin. Nevertheless, the clear presence of Bitcoin allows it to command over other competitors.

Bitcoin production cost

One of the most significant determiners of the price of Bitcoin is the cost of its projection. Although Bitcoin is a virtual currency, it requires to be produced through electricity and is known as mining. Miners of Bitcoin currencies intricate cryptographic mathematics and solve the same for mentoring new Bitcoin. Bitcoin production is different from other traditional products as it allows individual miners for the minting of coins.

Impact of supply and demand in the market

The supply and demand in the market have a significant influence on the price of bitcoin. Therefore, Bitcoin miners should develop a fixed production rate and design them over a long period, thereby allowing the demand to increase. Conversely, the number of Bitcoin existing in the system should impact the supply making it available for investors.

Debate of regulators

The increasing demand and popularity of cryptocurrencies have led to confusion regarding their classification. Some reputable Commission regards cryptocurrencies such as Bitcoin as a security while others consider them a commodity. Moreover, many financial products in the market identify Bitcoin as an underlying asset. As a result, many investors find it unaffordable to purchase Bitcoin.

Security and stability

Since the government has nothing to do with digital currencies, the transaction depends on miners and producers. Therefore, the developers must keep the blockchain secure. Any change in the software agitates the Bitcoin community as it is not easy to solve fundamental problems. The size of blocks is a significant determinant of the number of transactions.

According to Ian Mausner, slow transaction processes divert the investors’ attention towards competitive digital currencies.