Many people want to trade Bitcoin for profits due to the increasing popularity of this activity. This decentralized virtual currency has altered the financial sector to a level of no return. It offers individuals access to digital funds, decentralized governance, and efficient cross-border transactions. Some people that use Bitcoin even wonder whether they need banks anymore.
With the potential of this virtual currency, people are rushing to trade it for profit. Nevertheless, Bitcoin trading is not the same as forex and stocks trading, though they have similarities. What’s more, several factors affect Bitcoin trading. They include the following.
A primary factor affecting Bitcoin trading is code updates. Bitcoin and other virtual currencies keep changing as developers add new elements frequently. Code updates improve the overall performance of this cryptocurrency while enhancing decentralized finance adoption globally.
For instance, the addition of the Lightning Network has changed how people trade Bitcoin. That’s because the announcement of the changes alone can affect Bitcoin price. However, what matters most is the implementation and usage of the updates. If the changes do not work, traders and investors can lose faith in this cryptocurrency. But if traders already expected the updates, they may not affect Bitcoin’s price.
Demand and Supply
Demand and supply are essential principles in almost every financial sector. And these are specific factors affecting Bitcoin trading like they do with forex and stock. For instance, Bitcoin’s price increases when the crypto market has a low supply of this virtual currency. And this affects the number of traders that opt to purchase or sell their tokens. If the market has a high supply of Bitcoin, its value decreases. And this also affects how people opt to trade this digital currency.
When Bitcoin demand is higher while supply is low, the price of this virtual currency increases. Also, Bitcoin’s supply has a limit. Hence, scarcity can be a significant force affecting how people trade this virtual currency.
Production cost is another factor affecting Bitcoin trading. The Bitcoin mining process correlates with supply and demand, as well as costs. For instance, Bitcoin mining is a complex and costly process, with an expected time for generating a block of around 10 minutes.
What’s more, Bitcoin mining consumes a lot of electricity, raising ecological concerns among some people. And such developments can affect Bitcoin trading and investing.
Countries are looking for ways to regulate Bitcoin globally due to its rising popularity. Some regulators don’t know how to define this virtual currency. The Securities and Exchange Commission defines Bitcoin as a security. On the other hand, the US Commodity Futures Trading Commission classifies it as a commodity.
Too repressive or stringent Bitcoin rules affect how people trade this virtual currency. That’s because the regulations can cause a decline in its price. However, if the rules favor the crypto industry, they will drive its rapid growth.
Being decentralized means regulations can affect Bitcoin’s price directly because they relate to traders. Thus, people are unlikely to purchase Bitcoin if concerned about a government’s decision or statement that may affect the crypto industry negatively.
When the media gives Bitcoin more coverage and attention, more people understand how this virtual currency works. Consequently, more people are likely to start trading Bitcoin once they learn how it works. Essentially, positive media coverage can increase people’s interest in buying and selling this digital currency.
Bitcoin trading is undoubtedly a popular online activity with people using platforms like bitcoin pro to purchase and sell this digital currency. However, several factors affect Bitcoin trading globally. Whether a new or experienced trader, you should know these factors to make informed crypto trading decisions.