Bitcoin Forum

I'm a bit new to Bitcoin. I've been following its growth over the past few years and am really interested in trying it out. But I have some questions which I can ask here right?

Something I've never understood is how is Bitcoin price calculated?

*I think* it's done like shares, on the exchanges where it's simply a matter of supply and demand, like haggling at the market.

Bitcoin is constantly being traded on a number of exchanges, on these platforms there is;
• Demand - how much people are willing to pay for it, and
• Supply - how much traders are willing to sell it for
Basically, the price is calculated based on these factors, the higher the damand against supply, the higher the price. These market factors are in turn affected by secondary factors, positive news would grow demand as investors try to buy in, while negative news would reduce it and grow supply as people try to sell off

There are different order books on the different exchanges, reason why there is no fixed price. The value on binanace would be different to that on coinbase.
Cointrackers like coingecko and CMC calculate the average price on various exchanges and give an aggregate value.

This is a simple answer how its price being calculated. The calculation was posted above and this is how it goes.
As per coinmarketcap.com
Total market cap = $681,180,607,574
Circulating supply = 18,601,468

Here's the other calculation.
Which leads to the current price of $36,619 but it changes all of the time because it is volatile.

I think the OP is asking how the price actually moves, rather than a current snapshot.

OP is asking about bitcoin price not market capitalization. The website you linked is not useful at all, unless you want to find what different altcoins exist and where you can trade them.

Bitcoin's price is decided the latest executed buy/sell offer on exchanges. Let's say 5 seconds ago someone bought 1 BTC for a price of $36,000 on Binance. Bitcoin's price on Binance would then be $36,000 (temporarily, until the next order executes, which should only take mere seconds).

Now, on a bigger scale(e.g. CoinMarketCap), Bitcoin's price listed there would be the average price of all the exchanges listed on CoinMarketCap.

Also, supply and demand. Let's say you live in a country where people totally love apples so so much where people are frequently buying them any time of the month. And since farmers are totally aware of the people love for apples, a lot of farmers plant them. Now, a huge ass storm came, destroying like 90% of the apple plantations in your country. Since the demand of apples stayed high while the supply dropped significantly because of the storm, the price would then rise a good chunk. Though not exactly the same, that's somewhat how Bitcoin's halvings work.

Ok right. So the exchanges get the price by calculating the supply/demand thing. And then CoinMarketCap averages all of the prices across all exchanges.

Ok wait I heard about this thing too. The bitcoin halving... Is that the same thing as a fork or something? And in the bitcoin halving, basically the number of coins that people who mine the blockchain receive becomes half right? And i've read that halvings correlate with intense boom and bust cycles that end with bigger prices. Why is that? And what effect does a bitcoin halving have on its price inflation?

Bitcoin price depends on the frequent agreed price between two people transacting at an exchange. Theoretically, it is simply a concept where person agrees to sell a coin at this X price and another person who is willing to buy on that X price

Let's say for example.

Joe received his $30,000 monthly salary and he decided to buy a fraction of bitcoin since he believes that bitcoin is a good asset that will preserve his wealth in the long run. He then goes to an exchange and sees that bitcoin price is ranging from $35,300 to $35,350 and since he is buying, he wanted it at a cheaper price possible. So, he placed a limit order at a price of $ 35,290.

Alice has made $40,000 by selling books though a popular online marketplace. However, he needed to pay her debt, tax and other basic necessities. After doing so, her remaining balance is $20,000. Similarly, she decided to buy bitcoin using her remaining balance. She then goes to an exchange and placed a limit order of $35,315.

Bob holds 4 BTC that he previously bought at $35,300 each. Unfortunately, he's tired of seeing volatile price action that leads him to decide in selling his holdings. And since he belongs to a group of people who are weakhands and is willing to exchange his BTC for an inflationary fiat. Similarly, he goes to an exchange and place a limit order at $35,310 to avoid selling at a losing rate.

Billy also have 15 BTC in his pocket. However, he wants to have an early retirement which urged him to sell his BTC at an exchange with with selling order at $35,320 each.

Due to the increased price of bitcoin these past few days, Mark suffers from FOMO and deliberately used his $25,600 savings account to buy BTC. Since he wanted to buy BTC as soon as possible, he goes to an exchange and used a market order to instantly exchange his savings into BTC. As we all know, Market order chooses the lowest possible rate that is present on the order book which in this case is from Bob where he agrees to sell his bitcoin at $35,310.

Mark will now receive 0.729 BTC while Bob receives Mark's $25,600 plus his remaining bitcoin is now at 3.271BTC

At this particular moment, the current price of bitcoin will now change to $35,310 since it is the frequent agreed price between 2 people. Take note that the change in price happens every second at different exchange that is why price variation exists im every trading platform.

A Bitcoin halving is an event that takes place every approximately 4 years(210,000 blocks) where the bitcoin being mined per block is cut in half. Before the last halving, 1800 BTC are being mined per day. And after the last halving, since it's literally been "halved", only 900 BTC are being mined per day right now.

Kinda. After halvings, since miners have to sell some of their mined bitcoin for them to be able to pay for the electricity their using, significantly less bitcoin are being sold on exchanges. Hence, having significantly less selling pressure. So after a while, again since far less bitcoin are being sold, this causes bitcoin to rise in price.

Going back to my apples example. The halving is pretty much the storm, which significantly reduces bitcoin(or apples) being created.

Wait don't miners have to do this anyway? Like even before the halving don't they have to sell their bitcoin? So why does this have any effect on bitcoin being sold on exchanges? And in-turn why does it reduce selling pressure?

After any halving, there's 50% less Bitcoins being mined per day and as such less available for sale leading to lower sell pressure and hence demand grows against supply. Of course earlier investors have Bitcoin to sell, but miners are the only source by which new coins are introduced into the market.

There is also the psychological effect, for a long time halvings have been associated with price increases, so investors and traders expect bull runs after the halving leading to an increase in demand and the propensity to hold for higher prices.

I don't think miners follow a particular rule book, some hodl their coinbase rewards, while others sell them off as soon as they're received. But as I mentioned earlier, they are the source of all new coins so a decrease in that supply would affect sell pressure.
The price of bitcoins is expected to adjust inorder to keep mining profitable, whether they're are getting 50BTC per block or 6.25BTC or none at all, when all bitcoins have been mined.

So does mining account for a significant portion of the coins being sold? Is that why miners' decreased participation reduces supply?

Yeah I understand the psychological effect of the halving.

Also who halves bitcoin? Like how does it halve?

Welcome!
Answer to OP.

Source can be seen directly: Frequently Asked Questions (https://bitcoin.org/en/faq)

Close to 90% of Bitcoins have already been mined, so new rewards do not much increase the supply.
However, consider that mining accounts for all Bitcoins in circulation and it's hardwired, so an increase in demand would not result in a change in supply.
Trades are constantly being made on the different exchanges, and halving introduces new coins into the Bitcoin market; When that supply flow reduces and demand increases, buying pressure increases.

The software protocol was designed that way, every confirmed block comes with a coinbase reward and every 210,000 blocks (~4 years) that reward halves. Same way difficulty is adjusted every 2,016 blocks (~14 days).
Full nodes verify all transactions and ensure it's following the designed protocol, this is the consensus rule - https://en.bitcoin.it/wiki/Consensus

Miners are always competing to find the next block, which means computing a lot of hashes until they find a hash that when converted to an integer is smaller than a target integer that is coming from the "difficulty". This difficulty and the way it is computed is part of the consensus rules of bitcoin and anyone can compute it based on previous blocks and they all come to the same value.

Each time a miner finds a new block they can claim the reward for that block which has a fixed max value. It started from 50 and each 210000 blocks it is cut in half (again with the same consensus rules enforced by all bitcoin full nodes) automatically. We have had 3 halvings so far 50 > 25 > 12.5 > 6.25.

If miners leave or stop mining it takes longer to find blocks but when the "difficulty" adjustment period is reached (2016 blocks) it will readjust (the same consensus rules apply here too) and the subsequent blocks would be mined at normal speed.
Similarly when new miners come online it becomes easier to find blocks so the difficulty goes up hence making the time between blocks "normal" which means we want 2016 blocks to be mined in 2 weeks.

So essentially what this means is that Bitcoin price will keep on increasing? So that mining can remain profitable? So then what happens in 2140 when no more new Bitcoin is introduced? How can miners mine profitably?

The terminology is all getting very complex. :) But I think I understand a lot of the things. I understand how price works now and why it increases after the halving.
After reading the article you linked me about consensus, I do have a question: What is the difference between a full node and a miner? I thought node = miner?

Ok that makes sense. Thank you for the website. :)

See there's no any specific formula on how BTC price is calculated, if you see the market cap of other crypto and compare with BTC market cap then you will understand how it works.

This is purely depends on supply and demand the price floats based on the needs of buyer's and seller's at the end of day asset matters.

Welcome!
I see you are really new here. There's no such thing as the bitcoin price will keep rising. You really have to understand its mechanics.
Mining is only a part of the game.
Start here and then you can spend days on the topic. Good luck!
https://hackernoon.com/what-is-bitcoin-part-1-1755b81984e8

The price of Bitcoin usually changes in line with the supply and demand in crypto money exchanges and varies in each exchange. Bitcoin varies according to the purchases and sales transactions made by the users and the current balance of supply and demand determined by the users. States' positive approaches to cryptocurrencies are very effective in pricing.

Bad news make bitcoin down but just few minutes only like last night when bitcoin from $39k become $34k just few minutes although back and recovery right now to higher price, I think many people still easy how to make panic with bad news and without correct news and make them sell bitcoin or altcoin on lower price, maybe they not really patient when price down always have way for bitcoin and altcoin back to higher price.

@Montane we are in a free market so the law of supply and demand dictates the price of Bitcoin. The forces that act on the markets are quite complex and dynamic changing from a moment to another.
When buyers overpower sellers, the price grows and vice-versa. If you are interested I recommend reading some economy and business books. Financial education is worth your time, I assure you.

With bitcoin, the rule of supply and demand can be applied but if you think price is decided by this rule, you are wrong. The bitcoin market is more manipulated than stock market or others. There is no limits on margin of changes within a day. Bitcoin market is 24/7, not like other markets.

What you wrote is for crashes that happen fast. Price crashes in seconds, minutes and recover very quick. They come from manipulations and liquidations, not from supply or demand.

My opinion is above, this law is for long term not short term. It is useful for investors not for traders or gamblers.

That one is for long term too: https://twitter.com/BTC_Archive/status/1348597238109499399

Miners having to sell their bitcoin completely depends on them. But mostly for the large-scale miners, again like I said, they need to pay for and afford all the electricity they're using one way or another(the electricity usage of large-scale miners are NO JOKE), and one of those easiest ways to access cash is to sell the bitcoin they mined.

You would also have to consider the difficulty adjustments. Averagely, a block is confirmed every 10 minutes, however if there is huge competition among miners and increased efficiency of mining ware, it could be done faster than that, when this happens difficulty adjusts to make it more difficult to find the next block and keep the time at the average.

This also functions to keep mining profitable, if Bitcoin's price drops, it becomes less profitable to mine and ideally more miners would quit, this would lead to a drop in hash rate and block confirmation would be slower, when this happens the difficulty drops and it becomes easier to confirm the next block, making it cheaper, and keeps mining profitable.

Basically, asides the price changes, which is expected to increase overtime to keep mining profitable, adjustments to the difficulty also helps to balance it out.

Nodes are programs or computers which are connected to the Bitcoin network, all nodes are interconnected. There are different type of nodes, such as full nodes, pruned nodes etc.
Full nodes have the complete data of all transactions on the block chain, they verify and relay transactions to other full nodes.
All miners are nodes, but all nodes are not miners. However, while miners are connected to the network (nodes), they do not have to be "full" nodes.
Read more here - https://en.bitcoin.it/wiki/Full_node#What_makes_a_full_node.3F

Such decreases have occurred frequently and do not be surprised if you look back a few months ago there was a very sharp increase in an hour and soon it fell again by a large margin. it continues to do so when going beyond an unattainable price point. So there's really no need to panic because everything will come back again, it's now a normal cycle.

the problem is that altcoins are not able to follow the movements that occur with bitcoin and this is detrimental to altcoins, hopefully if people say that this year is the year of altcoins, then we will wait for that.

Just like the other suggestions, they're giving an actual situation how its price was being calculated and I think everyone has contributed the exact information what OP is asking.
Good for you OP and you're doing the right way of asking for the things you want to know, keep it up.

Prediction bitcoin price only take raise on $50,000 and now looks table for bitcoin price after few days raise to higher price, maybe any good moment for looking bitcoin raise more than $2000 each day, but now bitcoin price have been stable and keep consist only on $37000. Maybe now chance for altcoin raise up when dominance for bitcoin less and give opportunity for altcoin to get raise to higher price.

The price of Bitcoin is determined by the market in which it trades - by means of supply and demand. It works no differently than other currencies or objects - the same way the price of your secondhand car, a bag of apples in the supermarket, an ounce of gold or just about everything else is determined.