Bitcoin saw a big dip in prices this week. According to experts, this plunge came because a set of miners called off a forking that was to happen this week
The interest in bitcoins has increased in line with the spike in its prices. In the last 1 year, price of bitcoin has increased over 800%. Its prices have also been volatile, with a big dip in prices this week itself. According to experts, this plunge came because a set of miners called off a forking that was to happen this week (read about forking here). However, bitcoin prices move up or down for many different reasons. Here’s a look at some of the reasons behind bitcoin price movements.
Supply and demand
Experts say the price of cryptocurrencies is unpredictable and it depends on demand and supply. “Price depends on the demand for buying and selling the cryptocurrency, matched with the supply of the cryptocurrency,” said Benson Samuel, chief technology officer and co-founder, Coinsecure. For example, no more than 21 million bitcoin can be created. “The fact that there are only a fixed number of bitcoin that will ever be created, ensures that there will never be inflation with the currency and that if there is demand and the supply is limited, the price of bitcoin will continue to go up,” said Samuel. Many ask whether the current valuation is hype. “It is difficult to categorize something as hype when bitcoin is not a return-generating asset. Its price is driven by demand, being a limited-supply good,” said Sumanth Neppalli, cryptocurrency and blockchain analyst, Zebpay, an app-enabled bitcoin exchange.