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How Bitcoin is valued? Understand here all the process

How Bitcoin is valued? Understand here all the process

Over the past years, the purchase and sale of cryptocoin has gained popularity in the market. Bitcoin’s performance caught the attention of experts and attracted many people to this asset. In 2017, the asset appreciated by 1,400%. The cryptocurrency closed that year being worth around  USD $ 19,300.

But what determines the value of Bitcoin? How Bitcoin is valued?

With the purpose to help you understand this concept more and learn how to calculate the gains that can be had with the currency, we prepared this post. In it, you will learn more about:

  1. What is Bitcoin?
  2. What are the factors that influence the Bitcoin value?
  3. How to increase your performance in the Bitcoin investment in the medium and long term?
  4. Why does the support of a specialized company improve its investments in Bitcoin?

1. What is Bitcoin?

Bitcoin is a cryptocurrency that emerged in 2009. Its specification was published by a technology forum user named Satoshi Nakamoto. Since then, following the initial principles, the currency is growing in a decentralized and continuous manner.

What does decentralization mean in this context? Bitcoin is a currency that does not have a regulatory agent, as is the case of the Real or Dollar (which is regulated by the Brazilian Central Bank or dollar which is regulated by the FED). At the same time, unlike traditional currencies, this cryptocurrency does not have its own securities-issuing institution: each Bitcoin is issued directly to users during transaction logging in the blockchain.

What is blockchain?

Blockchain is a centerpiece of Bitcoin. It is the ledger, that is, the place where users enter and all transactions made and recorded.

The blockchain is managed in a network and decentralized way. Miners (users who validate transactions) receive bitcoins whenever they can generate a single numerical code (called a hash) for the block in which the purchase, sale, or shipment operation of bitcoins will be saved.

This process is able to ensure that Bitcoin is trusted even if there is no one managing all transactions. Because the transaction storage process relies on powerful encryption, any fraud attempt is easily detected.

2. What are the factors influencing the Bitcoin variation?

Bitcoin’s potential for use over the years has made this currency gain strength and value. Just like an action, its price changes continuously as transactions occur. See below for some factors that impact Bitcoin’s revenues.

Supply and demand for money

Like any other asset, supply and demand also influences Bitcoin’s value. As the production of new bitcoins is limited to 21 million coins (and more than half has already been distributed), the trend is that values will become increasingly scarce.

On the other hand, the demand for money is modified by external factors. Newspaper stories, changes to the blockchain source code and its own popularity gained in recent years also impact the performance of the cryptocurrency.

The lack of sector regulation

Bitcoin, as we have said, is not regulated. This has a direct impact on the values ​​of each BTC.

Whenever some big government advances some proposal to regulate the purchase and sale of bitcoins, its price may fluctuate. Therefore, those who work in this area always keep an eye on the projects of the main Bitcoin markets.

The level of speculation around the currency

Nowadays, there are few places where it is possible to buy and sell bitcoins. This leads people to invest in speculation around the currency, that is, investments aimed at fast profits and without fundamentals.

As a consequence, the value of Bitcoin may fluctuate thanks to speculators. They will do everything to inflate the price of the currency quickly, execute a profitable sale and leave the market soon after. This movement leads to a later decline of Bitcoin, adjusting its value to one that is considered more just by the community.

3. How to increase your performance in Bitcoin investment in the medium and long term?

As we have seen, the price of Bitcoin is determined by a number of factors, such as demand and supply. Therefore, those who perform applications in this crypto, must be aware to ensure the increase in Bitcoin’s performance.

This is a process that requires careful and ongoing market research. To operate with Bitcoin, you need to have a comprehensive view on the high and low currency value trends, the quantity of bitcoins on sale and the chances of the currency being regulated.

In addition, possible changes to the blockchain code may also impact your performance, as the community may become less or more engaged in its use. The ‘network’ effect of currency use is of extreme relevance and should always be considered.

4. Why does the support of a specialized company improve its investments in Bitcoin?

The search for assets such as cryptocurrencies have gained space in recent years for its high potential for profitability. However, many people conduct their operations without the knowledge to identify good opportunities and have a complete view of the market.

The support of a reliable platform to buy and sell bitcoins is fundamental to avoid risks and to take advantage of the crypto market in a safe and agile way. Thus, it will be easier to get good profits in the medium and long term.

Alone or with the support of a partner company, calculating the Bitcoin recovery drives is just one of the first steps to start selling and buying the main cryptocurrency in the market.

Well executed, this procedure helps you gain a better sense of the results that can be obtained with Bitcoin and thus avoid risks that go beyond your operational strategy.

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This Post Has One Comment

  1. Much of the trust in Bitcoin comes from the fact that it requires no trust at all. Bitcoin is fully open-source and decentralized. This means that anyone has access to the entire source code at any time. Any developer in the world can therefore verify exactly how Bitcoin works. All transactions and bitcoins issued into existence can be transparently consulted in real-time by anyone. All payments can be made without reliance on a third party and the whole system is protected by heavily peer-reviewed cryptographic algorithms like those used for online banking. No organization or individual can control Bitcoin, and the network remains secure even if not all of its users can be trusted.

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