This is an explanatory guide on how Supply and Demand affects the price of Bitcoin and other Cryptocurrencies.
You are here probably to know how the price of Bitcoin (or altcoin) you are about to buy can be affected. Am I right? Then you are in the right place.
In few sentences, answers to your query will be provided.
What really is Supply and Demand?
In economics, Supply means the amount of a resource that firms, producers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or directly to another agent in the marketplace.
Demand means the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time.
Now, let’s bring it to Cryptocurrency.
What is relationship between Cryptocurrency and Supply and Demand?
In the simplest of terms, Supply in Cryptocurrency means Sell and Demand means Buy.
Bitcoin and ALTCOINS have specific amount that were issued to be in circulation. It is these amounts buyers and sellers in the market are trading.
The more people sell cryptocurrencies, the more we have on ground. And when something is in surplus, it will easily be affordable, hence the lower in price. The reverse is the case when people buy.
How Supply and Demand affects Price of Bitcoin
Flashback to when the price of one Bitcoin was Ten thousand dollars ($10,000) few years ago, people that bought it then did so in order to make profit by selling it at higher price by holding till December, 2020 (when the opening price of Bitcoin was more than $19,000).
Those who bought it then, demanded for it and stored it resulting in scarcity (if the demand is higher than supply) hence brought about the increase in the price.
When they are tired of holding, they decided to sell probably because they have made enough profit and demands are much on ground. By so doing, they turn from buyers to sellers and eventually give power and control of the market to sellers they have become.
Because, the more sellers stay in control of the market, the lower the price becomes.
So, after selling off the coins and the price dips, people buy more and hold in a bid to sell later at higher price. The more people buy (demand for Bitcoin), and they (buyers) take control of the market, the higher the price. And the cycle continues like that.
NOTE: There are some Fundamental/natural occurrences that can alter the price by taking control from one and hand over to another.
What makes people buy Bitcoin and ALTCOINS?
Some of the reasons people buy cryptocurrency are but not limited to;
- Government adoption/investment: If a government of a particular country decides to venture into it or gives its citizens go ahead, people will feel free to buy.
- FOMO: Fear Of Missing Out is when people start buying because the price has increased more than they could ever imagine. They won’t want to miss it again and that leads to aggressive buying.
- Involvement of organizations such as PayPal. The price of Bitcoin surged the month PayPal announced her involvement in Cryptocurrency. Reason? PayPal has millions of merchant using the payment gateway.
- Indirect recommendations from celebrities. What do you think will happen if someone like Barack Obama tweets, “I just bought $100m worth of BTC?
The more more people get to know about Bitcoin and others, the better their prices.
Wrapping up how Supply and Demand affects the price of Bitcoin and ALTCOINS
In this short article, your eyes have been opened to how buyers and sellers of Bitcoin and other Cryptocurrencies can alter the price.
Now that you know, you will have idea of when to buy and sell your cryptocurrency.
Should you have any question, don’t hesitate to drop it in the comment section.