What factors affect the value of Bitcoin

Factors Impacting Bitcoin Price Fluctuation

Numerous events significantly influence the cryptocurrency market, including Bitcoin. Its value has remained highly unstable throughout 2024. Understanding the factors that determine these price changes is crucial.

Key Market Indicators

According to Vladyslav Udianskyi, an expert from the European Association of Software Engineering, several indicators influence Bitcoin's price:

• Market Sentiment: News and events can sway investor confidence, affecting supply and demand ratios and, consequently, Bitcoin's price.
• Regulatory Initiatives: Government interventions and regulatory updates, such as the Chinese government's ban on crypto transactions in 2021, can lead to price declines.
• Macroeconomic Factors: Changes in interest rates or inflation significantly impact the market. For instance, a rise in inflation from 1.6% to 3% in the US in 2021 coincided with a sharp drop in Bitcoin's price.
• Technical Factors: Events like Bitcoin halving, where the rate of creating new bitcoins reduces, affect its value. However, it can also increase transaction confirmation and fees, potentially leading to a price drop due to reduced demand.
• Manipulation and Fraud: Studies have shown evidence of manipulation in the Bitcoin market, such as the use of Tether to buy Bitcoin at strategically important times, artificially inflating its price.
• Political and Economic Changes in the US: The American market heavily influences Bitcoin's price due to its reliance on the US dollar, significant investor base, and major financial markets.

Factors Affecting Bitcoin's Lower Price Limit

• Halving: A decrease in the supply of new bitcoins can lead to a price increase.
• Mining Costs: The cost of mining sets a practical minimum, as prices falling below this point make mining unprofitable.
• Historical Lows: Bitcoin often finds support at historical low levels, preventing further declines.
• Technological and Regulatory Progress: These factors can also impact the lowest possible cost.

According to JPMorgan analysts, $26,500 was the midpoint of the bitcoin production cost range in April, projected to double to $53,000 after halving. However, the actual effect of halving on Bitcoin's price remains uncertain.

Impact of Other Assets on Bitcoin

Falling prices of other major tokens, such as Ethereum and Solana, can affect the Bitcoin market. However, Bitcoin generally exhibits greater stability and less vulnerability compared to other cryptocurrencies due to its market dominance and SEC recognition as a non-security.