Bitcoin Price

[Montane]

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?

[tinopener]

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 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.

[Upgrade00]

how is Bitcoin price calculated?

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.

[tabas]

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 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.

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.

Code:

Total market cap / circulating supply = price

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

[tinopener]

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 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.

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.

Code:

Total market cap / circulating supply = price

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.

[pooya87]

You will find this useful
https://coinmarketcap.com/faq/
What is "Market Capitalization" and how is it calculated?

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.

Something I never understood is how is Bitcoin price calculated?

[mk4]

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.

[Montane]

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.

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.

Though not exactly the same, that's somewhat how Bitcoin's halvings work.

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?

[Maus0728]

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.

[mk4]

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?

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.

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?

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.

[Montane]

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?

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?

[Upgrade00]

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?

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.

[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?

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.

[Montane]

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?

After any halving, there's 50% less Bitcoins being mined per day and as such mess Bitcoin 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.

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?

[YOSHIE]

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

Welcome!
Answer to OP.

What determines bitcoin's price? The price of a bitcoin is determined by supply and demand. ... There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable.

Source can be seen directly: Frequently Asked Questions

[Upgrade00]

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

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.

Also who halves bitcoin? Like how does it halve?

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

[pooya87]

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?

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.

[Montane]

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 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 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

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?

What determines bitcoin's price? The price of a bitcoin is determined by supply and demand. ... There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable.

Source can be seen directly: Frequently Asked Questions

Ok that makes sense. Thank you for the website.

[kentrolla]

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.

[Karartma1]

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 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?

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

[Coinsfera]

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.