Bitcoin prices are highly volatile so they would normall go up today and down the next day or vice versa. However, after the Bitcoin’s netwelsh bull trend seen this summer, there has been a noted decline in retail. Broad-based or widesprad selling is seen to be the culprit here which pushes the Bitcoin market prices down.
The Bitcoin Price
The Bitcoin price is referred to as the composite price derived from the average of the prices from different exchanges or the USD price on leading exchanges such as Binance, Bitfinex, or Bitstamp. This would usually pertain to the closing price with a certain exchange. The price is updated each time a new trade is conducted.
There is no universal price for Bitcoin because the price for Bitcoin would vary depending on the exchange. As there is no uniform Bitcoin price, different companies create a composite index price which is derived from the average prices of leading currencies. The indexes become an equalizer that creates a balance to even out any unusual or unauthorized trading activity on one exchange.
Factors that Determine Bitcoin Price
Bitcoin pice is largely determined by the last trade done on a particular exchange. So, the price would normally go up in the event that the buying pressure also increases and goes down with the surge or increase in selling pressure.
Prices can go UP or DOWN depending on the following:
- Supply Shortage
- Media Hype
- Decline of Trust in Fiat Money
- Institutional Adoption
- Dumping of Coins in the Market
The Market’s Makers and Takers
If you look at the market movement, do you see more buyers or sellers? However, the trading process would take two to tango which means someone was able to buy bitcoin because another entity sold it. What really makes the prices go up or down is which side becomes more aggressive in terms of crossing the spread or simply put, this pertains to who has the best askin price or the best bidding price.
Market-Leading Exchange Effect
The exchange which renders the highest volume tends to have the official price. Most traders would usually pay more close attention to the major or leading exhange prices than the minor exchanges. With the major exchanges having the most privilege or authority in dictating prices, minor exchanges would tend to follow through.
When the Bitcoin prices go up to a point which nears all time high, this is the time that a price resistance is met and then the price wouldn’t be able to overpower the previous high price. Many traders would usually sell during this time which triggers a selling pressure that automatically brings Bitcoin prices down.
Media Fear, Uncertainty, and Doubt (FUD)
This happens whenever Bitcoin would receive a negative publicity which can precipitate massive panic so people would be selling aggressively as a reaction to fake news. Some media forms would usually take things out of proportion to create a hype or controversy which people may construe as factual and act accordingly. So, the next time you hear Bitcoin is dead or dying, verify your sources first before selling your BTC.
Dumping Coins in the Market
Whenever there’s massive selling of Bitcoins in the market, this also drags down its market price. As the selling pressure increases, the prices go down. There is a correlation seen in this pattern.
Bitcoin prices would continuously fluctuate until its adoption to the mainstream market. Right now, the buy and sell trend would largely disrupt Bitcoin. Bitcoin is at a consolidation pattern at the moment. So any change in the buy and sell pattern could probably change the trend at any time.