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October2018

Bitcoin: what its rate depends on

Bitcoin: what its rate depends on

Bitcoin started fluctuating in mid-spring 2018. According to CoinDesk, the cryptocurrency rate fell below $8 000 in the night of April 17; in the morning of April 18, BTC rapidly recovered its market position; but it dropped again below its psychological level of $8 000 by evening. In four days after the drop, the currency price returned to $9 000, reaching its 40-day high.                 

As of July 25, the rate of Bitcoin is around $8 300. But how long will it last?  

Let’s examine what causes constant plummeting of exchange rates and what changes the market will face by the end of 2018.   

What does affect the Bitcoin rate? 

Bitcoin is the first, most popular, and thus the most expensive cryptocurrency. Its price is affected by several factors. 

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One of them is limitedness. The BTC emission is limited: only 21 million coins can exist in the world. All of them will be approximately mined in the mid-22nd century. However, the amount of some altcoins is limited as well. So, why Bitcoin is that expensive in such a case?     

The fact is that BTC has the following:   

• the greatest amount of adapted exchanges among all cryptocurrencies; 

• trading platforms designed for its payment unit;  

• official exchanges allowing to withdraw this currency into fiat money; 

• crypto ATMs (ATMs for exchanging fiat money for bitcoins). 

Besides, the Bitcoin price formation is also affected by external factors: the political atmosphere, the level of global crisis, technology development, etc.  

Moreover, there are internal factors created by cryptocurrency exchange players. Frequently, experienced market participants, holding a lot of assets, have the upper hand. Due to their power, they arrange pump (reducing rates to low values) and dump (their increasing).       

The media activity of influential market players, rumors, gossip, and expert forecasts make common users give ear to tips from people who earn on them later.      

In order not to fall for a scam, players occasionally conduct a technical market analysis. It means a collection of certain data allowing analysts to predict changes in cryptocurrency market prices. It is the technical market analysis that usually helps to understand when the boost of the exchange rate is justified by external factors and when it is made artificially.            

Emergence of Tether and its relation to the Bitcoin rate  

The emergence of Tether token is full of rumors that it is used to conduct bitcoin manipulations. In January 2017, it transpired that Tether Limited and Bitfinex cryptocurrency exchange had the same teammates, in particular, CEO.      

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A user with the Bitfinexed nickname noted this fact, suggesting that exchange owners brought millions of Tether tokens to the market, massively purchasing bitcoins for them and thus driving up the BTC price. Afterward, the withdrawal of currency into fiat money would have no difficulty.          

If Tether is not backed by real capital, its owners raise funds out of nothing. Bitfinex strongly assures users that it is just a rumor and each USDT token is backed by the US dollar at the ratio of 1:1. Nevertheless, this information is still unconfirmed.         

At the same time, one has mentioned something more interesting. In April 2018, Bitcoin unexpectedly went up in price from $8 900 to $9 700 in 24 hours. The funny thing is that the boost has been preceded by the OmniExplorer publication about 300 million USDT being issued on the market.         

Cryptocurrencies and politics 

As it is known, Donald Trump’s campaign slogan “Make America great again” is aimed at limiting the withdrawal of capitals from the USA. The Bitcoin market also responded to the news about his victory: in November 2016, the BTC rate increased by 4%, reaching $738, a few hours after the publication of final election results.       

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This suggests that cryptocurrency will never become totally independent, no matter how we might want it. Bitcoin is developed by people, so politics also affects the formation of its price.   

Bitcoin rate forecast for 2018 

In 2018, there is a conflict between Bitcoin Core representatives and miners, which can affect the Bitcoin exchange rate this year.    

Bitcoin blockchain is able to process only 7 transactions per second because of the small size of the block, which leads to transaction delays. Some miners offer to solve the issue by increasing the block volume.  

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However, the Bitcoin system does not have a single center that accepts decisions regarding system operations. If all participants fail to agree on the problem, cryptocurrency can fall in value again.    

Even despite rate fluctuations, the emergence of doubtful tokens, and disputes within the system, Bitcoin showed an impressive growth in 2017. Therefore, this fact has just confirmed its status as the most in-demand cryptocurrency.     


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