Bitcoin trading is a very recent phenomenon that has caught the imagination of people so that many investors like to trade in the cryptocurrency. Unlike buying the virtual currency, Bitcoin trading is different, as there is no involvement of any exchange in it. Rather, investors have to log on to a Bitcoin trading site and start trading immediately after registration. In Bitcoin trading, investors have to speculate the price of Bitcoin after comparing the prices in different exchanges worldwide and can make profits from it. Due to the volatility of Bitcoin, its price can increase or decrease significantly at any time of the day.
There can be a lot of factors that affect its price, and understanding them can be helpful for any Bitcoin trader. These factors can depend on the currency itself as well as the industry and other reasons. In the following sections, we take a look at some of them to understand how Bitcoin prices can be influenced due to these factors so that Bitcoin trading can be done successfully.
- Supply of the cryptocurrency – Unlike real currency, Bitcoin has to be ‘mined’ – a process that involves complex use of sophisticated computer hardware to locate them. Hence, there is a finite supply of this virtual currency, and all of them may be mined by the year 2040. But the rate at which the new Bitcoins hit the market is not consistent, and they can be quite abrupt. Moreover, the activities of people who hold them can also be a determinant. Hence, the supply of the cryptocurrency can be a major factor in Bitcoin trading because its abundant availability can help in keeping the price low whereas a smaller number of Bitcoins in the market can push up the rate.
- Market Cap of Bitcoin – Bitcoin trading can also be affected due to the market cap of the virtual currency. By market cap, the value of the Bitcoin market is meant here. In addition to it, the perception of its apparent value can also make a difference. If the market cap of Bitcoin is high at any moment, traders can earn good profits while if it goes down, the profit may also suffer. Hence, a favorable Bitcoin market value, as well as a positive vibe around it, is needed at all times so that Bitcoin trading can stay rewarding for traders.
- Integration of the cryptocurrency – The ease with which Bitcoin integrates with various traditional currencies and ever-developing new currency systems play a large role in Bitcoin trading as the price of the cryptocurrency can be affected. Easy integration with these systems can mean that there is more acceptance of the virtual currency in the financial world that can be good news for any trader. Another important area of integration can be the crowdfunding platforms that tend to use it quite a lot, and integrating it over there can mean a lot.
- Acceptance by industry – Complete industry adoption of Bitcoin will play a very crucial role in Bitcoin trading. As of date, some industries have provided thumbs up to the idea, but not all of them have endorsed it fully. When corporate start embracing it, it is expected that the value of the virtual currency will go up further, and that can work wonders for any Bitcoin trader. It is an area that the Bitcoin promoters are trying to work upon on a gargantuan scale, and the result may pour in soon.
- Perception in news and other media – The press and media have not been very kind to Bitcoin since its inception. There have been a lot of negative stories on the virtual currency even at the best of times, and issues related to its value, safety, and longevity have been raised time and again. Therefore, public perception has also swung at times that has resulted in a varying price of the cryptocurrency. Thus, Bitcoin trading can also be subject to external factors like this. Manipulating the press and media is no solution to this as only a robust performance of Bitcoin can answer them in the best way possible, and that has just started happening! Also you can read more about the bitcoin network here: how bitcoin network works
Bitcoin trading can be affected due to one or many of these factors working in unison so that investors must be aware of them. Simply investing in the trade may not be as rewarding, and keeping an eye on these factors is also as important for achieving success in Bitcoin trading.