The price of a damn Bitcoin is dependent on several factors, be it the market condition or global economical condition.
We have to be aware of the damn fact that bitcoin doesn't have a damn value on its own, rather we have developed its value by giving it damn importance in the financial world.
Although physical elements such as gold likewise don't have any value on their own, it's just due to their rarity/scarcity by which the demand has risen.
If we consider a hypothetical planet where gold's presence is more than wood, then the wood would be costlier than gold provided the fact that wood is a basic necessity for the inhabitants living on that planet. The entire game of price determination is in the hand of supply and demand, including few more factors.
How Bitcoin Price Is Determined
Factors deciding the price of Bitcoin:
There come sub-categories in Supply and Demand; Let's know what are these two terms used in day to day financial environment with its subcategories playing a crucial role in deciding a stable supply and demand for Bitcoin.
How Supply controls the price of Bitcoin?
1. Finite Supply
Bitcoin has a limited supply of 21 million, that is when the total number of Bitcoin reaches 21 millionths, no further Bitcoin would be created. It prevents Bitcoin from getting undervalued if in case the supply exceeds the demand.
Moreover, due to its finite supply, as well as the damn fixed time at which new Bitcoins are created, the demand increases and so is the price for a Bitcoin.
Think in this way; when people around you as well as you started competing for a substance that's too rare and has the attention of all the people around you, certainly, one would put their maximum effort to get it.
So if bitcoin is in demand and the supply lingers down then the price increases. Finite supply plays an important role in determining the price of a Bitcoin. Although in the case of Ethereum, there's a whole new story. One cannot change the digits of finite supply unless the majority of the people in the Bitcoin community agree.
2. Fixed-rate of Supply
Bitcoin has a fixed supply of production at a time, as well as the production of new bitcoins lowers down after every four years (roughly).
The sagacity behind the halving of bitcoin is the increase of demand when the production of Bitcoins decreases over time. If the production of Bitcoin by chance, increases with time, the demand would be lowered down as well as the price (in most probable cases).
There's a whole article written on the process behind the fixed rate of supply, that is the halving of the Bitcoin, click here to redirect.
Currently, the reward for each block mined is 6.25 Bitcoins, which means that when a miner successfully mines a block, 6.25 BTC is rewarded to the miner.
To know more about mining, read this article. So basically, the stable production of Bitcoins as well as the halving of Bitcoins reward to miners every four years ensure low supply to clutch high demand. To start your mining, aka bitcoin production, refer to this article, make sure you have a decent PC in order to tackle the amount of energy required to mine bitcoins.
3. Holding
When a large proportion of Bitcoins is owned by a damn single individual such as a popular business magnate or a tycoon, this results in reduces supply, causing a giant rise in its price.
For instance, Elon Musk purchased 1.5 billion USD worth of Bitcoin, which noticeably increases the price. Unless someone is as powerful as damn Warren Buffett, no one can easily move the price of Bitcoin to the sky.
How does Demand decide the price of Bitcoin?
1. Adoption rate
Several multinational conglomerates started using bitcoin as a medium of transactions. When trustable companies started using Bitcoin, then Bitcoin is perceived as a trustable cryptocurrency in the eyes of investors, traders as well as common people.
More people have started adopting Bitcoin, which simply increases the demand for it and in return, the price goes up. If the adoption rate was low, then the demand would not have reached such a position.
2. Volatility
The price of Bitcoin fluctuates a lot. Although there's no certain way to prove its high volatility.
In fact, Bitcoin is one of the most volatile cryptocurrencies. At the same time, many people know that high volatility can yield more profit. Its large volatility somehow increases the demand for itself.
Hence, more volatility= more profitable=more demand=more price
3. Rival (s)
As we know that Bitcoin is the first form of cryptocurrency released in 2009 with no hope of succeeding. At that time, there was no rival or competition for Bitcoin, and no one views it as a thing to consider over. Right now there are more than 5000 registered cryptocurrencies and out of which Bitcoin was the first one to release.
Certainly, in the eyes of the people, Bitcoin is the most secured as well as the most trustable cryptocurrency just because of the fact that all the latter cryptocurrencies existing in the world indirectly came from the former Bitcoin.
The demand for Bitcoin is high just because of the fact that all other cryptocurrencies got its existence after Bitcoin. Imagine if there was no other cryptocurrency other than Bitcoin.
