What determines Bitcoin’s price?
Since its birth, Bitcoin has had volatile prices due to many factors. Unlike fiat, Bitcoin is not issued by the government or bank therefore monetary policy, inflation rate, or financial measurement don’t influence its price. Bitcoin acts more like a commodity. The price is influenced heavily by supply and demand. It depends on how many coins are in circulation and how many people are willing to buy.
bitcoins price has multiple factors.
fundamentally. the cheapest/base cost to acquire bitcoin is mainly from the most efficient mining cost on the planet. who wont sell at a loss. meaning they are the trend setter of the low of the low.
above that is the speculation price discovery
due to mining cost increases over lengthy periods going up due to the deflation of mining process. the underlying base cost on planet goes up, which then affects the speculative "demand" price discovery above that base amount
the speculative price discovery on the markets is not controlled by if there are 11mill coins in circulation(2012) or 19.2m coins (now) aka supply..
its a price discover of just the small allotment of coins on a market order list. due to peoples desires and sentiments of personal need
How does Bitcoin mining work?
What is Bitcoin mining? Bitcoin mining is the process of getting new Bitcoin. It also confirms the transactions in the network running in Bitcoin code and sync to all nodes on the chain. ‘Mining’ is performed on a computer for hash operations. The first computer to find the solution to complex math puzzles will get the right for the next block and this happens every 10 minutes. The ability to find the solution depends on the portion of the network’s total mining power.
The supply of Bitcoin is limited and the total supply is 21 million. The current Bitcoin is 19.2 million. The Bitcoin quantity will be reduced by 50% every time it reaches 210000 blocks or reduced once every four years by design.
bitcoin mining is the process of special nodes called a mining pool collating transactions into a batch(block) and then sending a header of that data to users with special hardware called ASICS to then hash a complicated puzzle to create a hash that has to meet a certain standard
the complexity of he puzzle adjusts depending on how fast blocks are solved. which is 2016 blocks every fortnight, which equate to ~10min a block average
the rest of the network see this block arrive and check it. and if all the rules are met, they accept it as he latest block.
for those who solve a block and have it treated as the wining block to be added to the chain of blocks, they have included in their block a reward for their work. which this reward is an allotment of bitcoin
this reward started in 2009 at 50 coins and halves every 210,000 blocks(~every 4 years) which means today its 6.25btc a block reward(new coins created) and in 2024 will be 3.125btc a reward
this depletion of new coin supply means in 2012 there was 10.5bmbtc supply, in 2016 was 15.75m supply and eventually there will only ever be 21m supply as you cannot half the smallest unit the system has
