This Is The Only Way How To Predict Bitcoin (BTC)s Price – Spirit of Crypto
Of course, there will be always the human factor; Emotion.
And emotion we got enough in the cryptospace. They are expressed in Fear and Greed index for example.
Let’s break Bitcoin (BTC)s price down to digestible elements that anybody can understand.
The only thing you need is some basic knowledge of cryptocurrencies and blockchain technology.
Supply and Demand
The basics for any market price of an asset is supply and demand. Low demand, the price will sink. High demand, etc. It’s like a real market where the beautiful flowers are higher in demand, and cost more. Bitcoin’s market is dominated by people that hoard Bitcoin, the so-called Hodlers. The more people Hodl, the more the price should rice since there is less supply available.
Supply and Demand
The basics for any market price of an asset is supply and demand. Low demand, the price will sink. High demand, etc. It’s like a real market where the beautiful flowers are higher in demand, and cost more. Bitcoin’s market is dominated by people that hoard Bitcoin, the so-called Hodlers. The more people Hodl, the more the price should rice since there is less supply available.
Scarcity element
Flowers will continue to grow, Bitcoin’s mining production won’t. It stops somewhere in the future in 2140 when 21 million Bitcoin (BTC)s are mined. That’s, in fact, one of the beautiful things of Bitcoin and huge improvement of the never stopping money printing presses we use for our current economic system.
Safehaven Currency
In hyperinflation countries like Argentina and Venezuela, Bitcoin is used for many years already to escape the inflation terrorism of the own government. A safe haven currency that has proven the ideal hiding place for confiscatable Pesos. Nobody likes his pension to be seized by any government or banks accounts being frozen overnight.
The Hashrate
Bitcoins hashrate is a metric that indicates how hard the Bitcoin miners are working. It refers to the amount of computing power miners are using to validate the Bitcoin blockchain. The more power, the more secure. The larger the rate, the more attractive mining is, and the better the outlook for Bitcoin’s price in the near future seems to be.
Institutional money flowing in: Bitcoin & Futures trading
There was a lot to do in 2019 about the real financial guys on the block, like future markets starting to trade Bitcoin. The CME group and more recently BAKKT adopted Bitcoin into their portfolio. They can be seen as the official entry point for institutional money entering the Bitcoin ecosystem.
Technological improvements that speed up the road to mainstream adoption
Bitcoin is still in its early adoption phase according to the lifecycle of new technologies. Speeds of transaction is an issue for many that want Bitcoin to become a new crypto payment system. Bitcoin blocks on its blockchain are relatively small compared to other blockchains. So why not take the transactions off-chain? This is what the Bitcoin lightning network is doing. It is called a layer 2 payment protocol. Take many payments offline, process them, and once online let the blockchain validate them on a later moment. Improvements of these kind of technologies that speed up the pace of adoption have also an influence on Bitcoin (BTC)s price.
Bitcoins Halving
Every 4 years the reward for Bitcoin miners, the people that get their hands dirty, is halved. Logical thinking would conclude that this would be a massive ingredient for a further surge of the price. That is correct, but history of halvings shows that this rise occurs only 1.5 year after the halving
Concerning the coming halving in 2020, a lower price around the halving time in may 2020 will lead to lower gains and difficulties for small miners, and a price more likely to stabilize or even decrease. When, through different conditions like economic crisis, the price rises in advance of the halving, a further rise can be expected after May 2020.
Stock to flow ratio
I realize that at this stage I might already have lost you. You see, it is getting already quite complicated. There is a reason for only 22 million Bitcoin (BTC)ers onboard. To make it even more complicated, some smart people came up with the Bitcoin Stock to Flow Ratio. It rhymes, but other than that, I mostly get a headache when I try to wrap my head around this.
In a few sentences; stock to flow is the relationship between total stock against yearly production. The total bitcoin stock is 21 million, and its yearly production can be calculated. The result gives traders a good feeling since the ratio will go up, as the asset is scarce.
This Bitcoin Stock to Flow ratio is Bitcoin (BTC)s scarcity expressed in numbers.
For a simplified explanation watch this funny 1 minute video, it shows it all
These are the main elements for Bitcoin (BTC)s price that somehow can be calculated and measured. This means that some of these elements can be more or less predicted based on historical data. For example, the over the counter trading in Venezuala can be more or less predicted looking at the volumes of the last years.
But what if President Maduro suddenly disappears?
Published at Sat, 08 Feb 2020 21:35:28 +0000
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