Help me understand BTC pricing

[adzino]

Am I correct in thinking that as the price of bitcoin goes up, it will take a lot more money to raise the price? Here’s an example…when bitcoin was $10,000 if 10 people bought $10,000 each, that meant 10 coins that we’re taken out of circulation driving the value of bitcoin up much more than if the price of bitcoin was $100,000 and 10 people bought $10,000 each of bitcoin that’s taking only one bitcoin out of circulation. So as the price of bitcoin goes up it will take a lot more cash inflow to raise the price. So is it safe to say that we will not see rapid gains like we had a few years ago where a bitcoin would go from 1000 to 10,000? I don’t see how so much money can come into the market to make it rise from 100,000 to 1,000,000 in an equivalent time span

Depends on the demand and supply. It's the buy and sell pressure that sets the bitcoins price. The more buy pressure (high demand), the higher the price will go since people will be selling their coins at higher price as more people are willing to buy. When the sell pressure (high supply) increases, the exact opposite happens. People are willing to sell their coins cheap for whatever reason and buyers are setting price even lower, causing the price to drop. The buy and sell pressure eventually reaches an equilibrium point, and that's the less volatile price we see.

[DoublerHunter]

~snip~

Depends on the demand and supply. It's the buy and sell pressure that sets the bitcoins price. The more buy pressure (high demand), the higher the price will go since people will be selling their coins at higher price as more people are willing to buy. When the sell pressure (high supply) increases, the exact opposite happens. People are willing to sell their coins cheap for whatever reason and buyers are setting price even lower, causing the price to drop. The buy and sell pressure eventually reaches an equilibrium point, and that's the less volatile price we see.

^ Definitely right, the basic principle is because of the demand and supply and the price will calculate based on the buying pressure increase and it will drop when selling pressure will increase. It was determined by the last trade on a specific exchange which is what they called the last bid. That is the reason becomes BTC price is very volatile because there are many people who buy and sell, and it depends on what they heard on the news, when there is a FUD, eventually the price goes down. And some are manipulating the market.

[Kelvinid]

If everyone is buying at a high price, since the supply is constant it is pretty obvious that the price will also increase. And this is happening now in real life. The more adoption has to come, the more we expect that the price of Bitcoin (as an example) will literally be moving high as well.

That is the law of demand and supply, it was not hard to understand it because we can also compare it to many things like in our local market. But as we can see, the price fluctuation has still able to experience because not all the time people are consistently buying, many were still selling and this is why it has become volatile and we can't control this thing.

[jrrsparkles]

Pricing of Bitcoin is simple and same as everything, it just depends on the demand and supply so whenever more people are selling the price will drop and when mkre people are buying the price will increase but the circulation is not going play a huge role as long as the volume on the exchanges is enough to handle the required trade orders to be executed.

[Hippocrypto]

The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. It is how bitcoin price works. It is really as simple as everything and it depends on marketcap.

[Coin_trader]

The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. It is how bitcoin price works. It is really as simple as everything and it depends on marketcap.

Supply and demand plays an important role for price development of Bitcoin. But currently the main factor affecting Bitcoin is speculation because Bitcoin supply is almost stagnant while the demand on using it is still the same. Traders are just buying it when there's upcoming news that results to hype but the usecase of Bitcoin is still the same.

[kryptqnick]

A lot of incorrect responses in here.

The market cap does not tell you how much money is in the system. Raising the price depends on the amount of buy and sell orders on the books, and not on the current price.

Lets say I have just created a new coin. There are 1 million coins, and I hold all of them. I sell 10,000 coins to Alice for $10,000. She has paid $1 per coin, so the market cap of my coin is now $1 million. $10,000 entered the system, my market cap increased by $1 million, and the price of a single coin increased by $1.

Alice now sells 100 of her coins to Bob, but she charges him $300. Bob has paid $3 per coin, so the market cap of my coin is now $3 million. Only $300 more entered the system, but the market cap increased by $2 million this time, and the price of a single coin increased by $2.

In the first trade it took $10,000 to raise the price by $1, but in the second trade it only took $300 to raise the price by $2, even though the coin was already more expensive.

So no, it does not necessarily take more money to raise the price when the price is higher. It depends entirely on how many people are buying and how many people are selling.

I agree that the amount of money in the system doesn't directly correspond to market capitalization, but I think the example, while correct for 2 people, doesn't quite work with Bitcoin.
Bob paid $3 per coin, but it doesn't mean that $3 per coin is a consensus (average market price), so there's no reason to believe that the market capitalization is now $3 million. The price does matter because market capitalization is the price multiplied by the number of coins (total number, which in this case is 1 million coins). And the price in question is average market price, so I'm not sure Bob and Alice are doing justice to this case, as it's just one deal, whereas what matters is the consensus.
Let's take a quick look at Bitcoin, and the data about it: the price is currently $61k per coin, and the circulating supply is 18,857,893. Multiply these two, and you get 1 trillion 153 billion 28 million (roughly), which happens to be the number listed on coingecko as Bitcoin's market capitalization. Alice selling 100 coins to Bob at $3 per coin might not (and realistically would not) be enough to change the average price to $3 per coin (again, since there are lots of people and lots of trading getting done), so it only works under unrealistic conditions of there being two people, two orders, and the price being adjusted accordingly.

[fiulpro]

The analysis if ofcourse right but may I point out :

- The price is rising every single day then it's attracting more companies, more investors and therefore it's making things bigger for an investment like : Bitcoins
Therefore at the starting it might be normal people in the market or computer geeks or some young people as well, but now companies like Tesla, Microsoft is showing interest and getting involved in their own way.

The more the price is, the more their value would be, the more it would be accepted in the market therefore its going to balance out the price difference and at the end it might even go faster if advertised in the right direction.

The value is dependent upon a lot of things, for example: A country made bitcoins legal, now what ? More people would keep it as an investment, especially people of that particular country and thus we can't really balance the value on this particular fact.

[taufik123]

From my own experience, I can say that this is really difficult to understand. At least, I have tried more than once to analyze the price, draw conclusions and predictions, but the accuracy is far from always the same that I would like to get.

the analysis will not be 100% accurate and of course there will be some errors. The analysis is only as a reference where the market will go. Many factors will influence. Speculation continues so that the analysis sometimes does not go according to plan.
analysis is still needed even though it does not have 100% accuracy, because by doing the analysis we will understand how the BTC price will go.

[SmokerFace]

What you're saying is possible but the actual price depends on the Availability and Demand of Bitcoin.
Whoever has the most bitcoins can manipulate the market potently compared to those who have less. He' can manipulate the perspective of how the trades will proceed.
If they want then they can bypass al indicators of other users and trade between which will be beneficial for them. I know it's hard to take in but that's what Whale do.

I'm sure they have tools to find what Indicators, strategies Mass traders use.

[o_e_l_e_o]

so I'm not sure Bob and Alice are doing justice to this case, as it's just one deal, whereas what matters is the consensus.

Sure, I take your point, but in my example where there are only a handful of trades happening, then the most recent trade is the best estimate of the consensus and therefore the market cap. The same is probably not true of bitcoin, since people frequently buy and sell either above or below the current price on a variety of markets for a variety of reasons.

Alice selling 100 coins to Bob at $3 per coin might not (and realistically would not) be enough to change the average price to $3 per coin (again, since there are lots of people and lots of trading getting done), so it only works under unrealistic conditions of there being two people, two orders, and the price being adjusted accordingly.

Sure, but the principle still stands. At time of writing this comment, the following numbers are roughly accurate:

Price $61,600
Circulating supply 18,858,637
Market cap $1.162 trillion

Now, if we look at Coinbase, there are presently about 130 BTC of sell orders in the next $1000, up to $62,600. For those to all be bought up, it would cost somewhere around $8.1 million, but the price would then be $62,600, making the market cap $1.181 trillion. So for $8 million of buying, we've increased the market cap by $19 billion, for a multiplier of over 2000x.

And yes, I know Coinbase is not the only exchange, but that is just an example of how the principle still stands with much larger markets with thousands of traders. A relatively small amount of money entering the system can move the market cap by a much larger amount.

[GeorgeJohn]

The price of bitcoin can be rational and irrational from people who do not understand it's domination, actually it's very understandable and obvious to us that bitcoin price is denotes through the market situations, which is pointing at an arrow to the demands and supply of the market, so the price always been in rotational motion, either falling or rising because of the nature of the market movement, when the demand is sufficient than the supply, it's obvious that the market will eventually been accelerated or elevated, so the same thing is applicable to the supply situations which can fall to the decreasing involvements of bitcoin when it occurs.

[cryptosize]

Am I correct in thinking that as the price of bitcoin goes up, it will take a lot more money to raise the price? Here’s an example…when bitcoin was $10,000 if 10 people bought $10,000 each, that meant 10 coins that we’re taken out of circulation driving the value of bitcoin up much more than if the price of bitcoin was $100,000 and 10 people bought $10,000 each of bitcoin that’s taking only one bitcoin out of circulation. So as the price of bitcoin goes up it will take a lot more cash inflow to raise the price. So is it safe to say that we will not see rapid gains like we had a few years ago where a bitcoin would go from 1000 to 10,000? I don’t see how so much money can come into the market to make it rise from 100,000 to 1,000,000 in an equivalent time span

Back in 2008-2009 FED printed 700 billion USD to bail out the economy.

In 2020 the FED stakes were raised to 7 trillion USD (10x).

When the next crisis comes (2030?), I'm pretty sure FED will have to print 70 trillion USD.

See where I'm going?