There are many factors that affect the price of Bitcoin over time.
Market supply and demand – this is the main factor. Today, Bitcoin does not have any physical equivalent in the real world, so BTC is sold on exchanges. The main principle of economics is that if people buy a currency, its price rises, and if people sell a currency, its price falls. Bitcoin is no exception. In the fall of 2013, prices rose tenfold due to Chinese demand.
Total number of bitcoins and number of bitcoin holders – The total number of bitcoins is 21 million, but they are being mined over time.
Currently, there are around 16 million BTC and over 14 million people have BTC wallets. This number is growing rapidly, and since the number of Bitcoins is fixed, the price will continue to rise.
Media coverage of news – the human element is always there – such as how people react to news. Remember the 25% price drop after Ross Ulbricht’s arrest and the new price record set in anticipation of the Winklevoss ETF .
Technical issues – Bitcoin has an open source code so everyone can check it out. A new update that fixes some bugs and weaknesses in the code could drive the price up. At the same time, a successful account hack or server attack can lower the transaction price. In August 2016, some hackers discovered security issues with Bitfinex, and the price fell after that.
Global political and economic events – In today’s globalized world, a decision from one country can affect the whole world – such as Japan ‘s acceptance of Bitcoin as a means of payment.
High Volatility – Volatility is the degree to which the price of a trade changes over time. Volatility can lead to uncertainty or risk in the value of securities. Higher volatility means that the value of a security may be spread out over a wider range of values. In other words, the price of a security can move dramatically in either direction in a very short period of time. Bitcoin’s volatility is around 10%, but it ‘s falling .