Category: FAQ

Posted on and Updated on by coinmarketstrategist

The various factors that affect Bitcoin’s price.

Satoshi Nakamoto, the pseudonym given to Bitcoin’s creator (or creators), created the cryptocurrency in 2009. The blockchain is a public ledger that records bitcoin transactions and establishes ownership.

Bitcoin is a form of cryptocurrency that was created in 2009 by an unknown computer programmer using the alias Satoshi Nakamoto. Bitcoin, unlike traditional currencies, is not produced or backed by a central bank or government. Purchasing a bitcoin differs from buying stock or bonds because Bitcoin is not a corporation. As a result, there are no corporate balance sheets to analyze, no fund performance data to compare, and no other conventional ways to choose an investment.

Learn what influences Bitcoin’s price so that you can make more informed decisions about choosing it as an investment.

The value of Bitcoin is not determined by a central bank or backed by the government, so standard monetary policy approaches, inflation rates, and economic growth statistics do not apply. Because Bitcoins are more of a commodity than a currency, the price is impacted by the following variables:

– The amount of bitcoin available (supply)

– How much people want to buy it (demand)

– The cost of producing a Bitcoin through mining processes

– The number zones where buying or using cryptocurrencies is regulated

The availability of a commodity has an influence on its price. A rare thing is more likely to have a high value, while one that is readily available will have a low value. Because only 21 million bitcoins will ever exist, and only a specific quantity per year will be produced, Bitcoin’s supply is generally well-known. Its protocol merely permits new bitcoin to be created at a set rate, which is intended to decrease over time.

Because the amount of Bitcoin in circulation is decreasing, demand will rise. This is comparable to a corn surplus being reduced every four years until there was no more production and it was publicly announced that it would occur—corn prices would explode.

The value of Bitcoin has been on the rise due to increased media coverage and demand from investors. Its popularity in countries with high inflation rates devalued currencies, such as Venezuela, has also contributed to its increasing value. However it should be noted that Bitcoin is also popular among those who use it for illegal activities to its anonymous nature.

As a result, a rise in bitcoin’s price is due to shrinkage in future supply coupled with an increase in demand. Its value, on the other hand, fluctuates erratically between booms and busts. A Bitcoin price explosion in 2017 was followed by a lengthy low before two rapid boosts and downturns through 2021

Like other valuables, how much it costs to produce bitcoin plays an important role in determining its price. Some research suggests that the price of bitcoin in cryptocurrency markets is closely related to marginal cost of production.

The cost of mining a Bitcoin is calculated as the sum of direct fixed costs for infrastructure and electricity required to mine the currency, as well as an indirect cost linked to the problem difficulty level. Miners compete to solve an encrypted number known as a hash—the first miner to do so wins new bitcoins and any transaction fees paid since the previous block was discovered.

Solving the hash to open a block and receive a reward necessitates the use of tremendous processing power. The miner will have to purchase many expensive mining equipment in monetary terms. The bitcoin-mining process also consumes significant amounts of electricity. According to predictions, the bitcoin-mining network uses more electricity than some small countries.

There are hundreds of cryptocurrencies other than Bitcoin vying for investment dollars, but as of 2022, Bitcoin still holds a majority of the market share.

 

However, its power has gradually decreased. In 2017, Bitcoin held more than 80% of the entire market capitalization in cryptocurrency markets. By 2022, that number had dipped to below 50%.

 

The primary cause of this was increased awareness of and abilities for alternative coins. Because to a proliferation in decentralized finance (DeFi), Ethereum has emerged as a strong challenger to Bitcoin. Ether, the cryptocurrency that is used as “gas” for transactions on its network, has attracted investors who see its potential in reinventing modern financial infrastructure. The Ethereum ecosystem includes around 20% of the overall market capitalization of crypto markets.

As newer cryptocurrencies, such as Tether, BNB, USDCoin, and Solana become more popular among investors, they have begun to take market share away from Bitcoin. However, the increased competition has actually led to more investment dollars flowing into the Bitcoin ecosystem. As a result of the increased demand and awareness for cryptocurrencies that this Competition has generated evenly throughout 2012 prices for Bitcoins remained high

Bitcoin was created in the aftermath of a financial crisis caused by deregulation in the derivatives market. The cryptocurrency itself is unregulated and has become known for its border- and regulation-free ecosystem.

Bitcoin’s lack of regulatory standing has both advantages and drawbacks. Because there is no regulation, bitcoin can be used freely across borders and isn’t subject to the same governmental limitations as other currencies. Governments and interested parties, on the other hand, are continuing to push for cryptocurrency legislation.

The creation of a regulatory framework is only a matter of time, and the impact it will have on Bitcoin’s price is impossible to predict. For example, SEC cryptocurrency rulings might have an effect on Bitcoin’s value in the United States. The price of Bitcoin rose to $69,000 in October 2021 shortly after the SEC gave its blessing for the first U.S. bitcoin-linked ETF: the ProShares Bitcoin Strategy ETF (BITO). However, just as it was reaching that mark, Bitcoin’s price had fallen to around $40,000 a few months later.

 

The introduction of China’s bitcoin trading and transaction ban in September 2021 had a big impact on the supply and demand of bitcoin. Mining farms in China were compelled to pack up and move abroad as a result of China’s bitcoin trade and transaction prohibition. Prices dropped from around $51,000 at the start of September to around $41,000 by the end of the month, only to rapidly rebound and surpass previous price levels as operations resumed.

The media and news reporting work both for and against Bitcoin’s price in an effort to keep investors and interested parties up to date. Any changes in any of the factors outlined above are swiftly revealed to the public. As a result, good news for cryptocurrency investors tends on sending Bitcoin’s price up, while bad news sends it down.

Many things, like supply and demand, production costs, competition, media coverage of regulatory developments influence how investors feel about cryptocurrencies. This is one of the most significant factors that affects cryptocurrency prices.

Posted on and Updated on by coinmarketstrategist

What is Ethereum, and what should you know before investing?

Ethereum and Bitcoin have rapidly become household names. While they’re frequently mentioned together, they are not the same.

Bitcoin was designed as an alternative to conventional money. Ethereum is inspired by Bitcoin, but it has grander ambitions: to build a software platform that allows users to run decentralized applications without the need of a third party, giving them more control over their data.

What is Ethereum?

Ethereum is a decentralized computing platform network built on open-source, distributed technology. The Ethereum network, like the Bitcoin network, is based on blockchain technology, which essentially is a digital public ledger where financial transactions can be verified and stored by software without the need of a third party.

The Ethereum network is best thought of as a secure database that anybody can use. When new “blocks” of information are added, they’re cryptographically linked to a parent block, making an uneditable chronicle of the prior changes.

Ether is one of the most famous cryptocurrencies, owing to its market capitalization ranking second only to bitcoin.

But the network’s potential to do more than just handle financial transactions is what makes Ethereum so appealing to users and enthusiasts. Developers can use Ethereum to create “smart contracts” (programs that can host any sort of decentralized application) that go beyond Bitcoin’s capabilities.

Bitcoin was the first to utilize blockchain technology in a peer-to-peer payment system, according to Jacob Wade, a financial coach and president of iHeartBudgets. “Ethereum utilizes similar blockchain technology, but it also has the capacity to develop decentralized applications on its platform,” he adds.

People have already developed and launched a slew of Ethereum dApps, including games, digital art marketplaces, and decentralized finance (DeFi) applications.

Is Ethereum a viable investment option?

It is, however. There isn’t one right answer for anybody looking to invest in Ethereum. The most important thing to remember is that, like any other investment, it’s speculative and should be treated as such before putting it in any portfolio.

Ether is becoming increasingly widely available, and there’s a lot of buzz in the media about its increasing value – but it’s vital not to be too caught up in the hype.

“It may be useful in a portfolio, but it should be regarded as highly speculative,” he adds. “Also, while the technology is promising, it’s uncertain which technology will win in the long run.”

Posted on and Updated on by coinmarketstrategist

Frequently asked questions about stocks

What are brokerage accounts, and how do they work?

A brokerage account is a financial instrument that allows you to buy, sell, and hold stocks and other investment assets. You may deposit and withdraw money like you would with an ATM. However, unlike a bank account, your cash balance may be used to acquire stocks, ETFs, mutual funds, options, futures contracts, forex currency trading , bonds, and other investments.

What is the most effective way to buy and sell cryptocurrencies?

Accounts at online brokerages are linked to the US financial infrastructure. You may generally use your brokerage’s mobile app to deposit funds by check. You can also wire funds, send electronic transfers, and use other supported methods to your brokerage for addition or withdrawal of funds.

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regulate brokerage accounts in the United States. While investment assets may lose value, the US government guarantees brokerage accounts through the Securities Investor Protection Corporation (SIPC).

Who should use a brokerage account?

Anyone interested in investing must first set up a brokerage account. You can’t buy and own stocks and other assets without one, so everyone who wants to invest should obtain one. If you’re heavily in debt, you may want to clear high-interest payments before putting too much money into the stock market.

Make sure you understand the risks and potential return of the stock market before jumping in. While most people invest with the goal of making money, stocks and other assets may decline in value. Make careful to research what you’re getting involved in so that you can better evaluate the dangers and potential income.

How much should a brokerage account cost?

In the 2020s, brokerage accounts should be almost entirely free. With a few exceptions for active traders and managed portfolios, you should be able to create and maintain an account with no minimum balance requirement, no recurring costs, and no activity restrictions.

In 2019, most brokerages eliminated stock and ETF commissions as well as base fees for options. This makes investing more accessible to people of all income levels. Some of the other brokerages that provide commission-free trading include Merrill Edge and TradeStation, among others.

How do I choose an online brokerage?

Every investor has his or her own objectives and tastes. You should choose a firm that offers platforms and tools that are easy to use, as well as financial solutions that match your investing strategy. Fees might significantly reduce the amount of money you make from your investments, so keep an eye on commissions, fees, and pricing for any services you may require in order not to be caught off guard by an unexpected charge.