Bitcoin is a digital currency created in 2009 by an anonymous person or group of people known as Satoshi Nakamoto. It is a decentralized form of money, meaning it does not rely on a central bank or other authority for its value. As with any investment, understanding what makes Bitcoin go up or down is essential to making informed decisions. In this article, we will explore the various factors that influence Bitcoin prices.


Analyzing the Impact of Political Events on Bitcoin Prices

Political events have a significant impact on the market sentiment, which in turn affects the price of Bitcoin. Investors tend to be wary of uncertainty, so positive developments in politics can encourage more people to invest in Bitcoin, while negative news can discourage them. Let’s look at some examples of how political events have affected Bitcoin prices.

In 2017, when China announced plans to ban initial coin offerings (ICOs) and cryptocurrency exchanges, the price of Bitcoin dropped from $4,800 to $2,900 within a few days. Similarly, when India announced plans to ban cryptocurrencies in 2018, the price of Bitcoin fell from around $10,000 to $7,500.

Exploring the Relationship Between Bitcoin and Traditional Currencies

Traditional currencies, also known as fiat currencies, are regulated by central banks. They are backed by the government and have a fixed supply, which means that their value is relatively stable. Cryptocurrencies, on the other hand, are decentralized and have no central regulatory body. This means that their value is highly volatile and subject to market forces.

Changes in traditional currencies can have a significant impact on Bitcoin prices. For example, when the Chinese yuan weakened against the US dollar in late 2016, investors turned to Bitcoin as a safe haven asset, causing its price to surge. Similarly, when the Turkish lira plummeted in 2018, investors sought refuge in Bitcoin and its price increased.

Examining the Role of Supply and Demand in Bitcoin Price Fluctuations

The supply and demand of Bitcoin is one of the major factors affecting its price. The supply of Bitcoin is finite – there will only ever be 21 million coins in existence. On the other hand, demand for Bitcoin is constantly changing due to various factors such as investor sentiment, media coverage, regulations and more. When demand increases and the supply remains constant, the price of Bitcoin goes up.

For example, when the European Union decided to regulate Bitcoin in 2017, demand for the cryptocurrency went up and its price rose from around $1,000 to nearly $20,000 within a year. Similarly, when Facebook announced its plans to launch a cryptocurrency called Libra in 2019, the price of Bitcoin surged from around $4,000 to $13,000 within a few months.

Investigating the Impact of Major Exchanges and Market Makers on Bitcoin Value

Major exchanges and market makers play a crucial role in determining the price of Bitcoin. Exchanges are platforms where investors can buy and sell Bitcoin. Market makers provide liquidity by buying and selling large amounts of Bitcoin at a set price. These entities can influence the price of Bitcoin by increasing or decreasing supply and demand.

For instance, when Coinbase, one of the largest crypto exchanges, added Bitcoin Cash to its platform in December 2017, the price of Bitcoin surged. Similarly, when the Winklevoss twins launched the Gemini exchange in 2015, the price of Bitcoin increased significantly.

Examining the Influence of Media Coverage on Bitcoin Prices

Media coverage has a significant impact on Bitcoin prices. Positive media coverage can attract new investors and drive up demand, resulting in a rise in Bitcoin prices. Conversely, negative media coverage can discourage potential investors and cause the price of Bitcoin to drop.

For example, when major news outlets reported on the Mt. Gox hack in 2014, the price of Bitcoin dropped from around $850 to $400. Similarly, when Bloomberg published a report about the rapid growth of Bitcoin in 2017, its price skyrocketed from around $1,000 to nearly $20,000 within a year.

Looking Into the Impact of Regulations on Bitcoin Prices

Regulations play an important role in determining Bitcoin prices. Regulatory clarity often encourages investors to buy Bitcoin, while unclear or restrictive regulations can discourage them. For example, when Japan officially recognized Bitcoin as a legal payment method in April 2017, the price of Bitcoin surged from around $1,000 to nearly $20,000 within a year.

Similarly, when the US Securities and Exchange Commission rejected a proposal for a Bitcoin-based exchange-traded fund in March 2017, the price of Bitcoin dropped from around $1,200 to $900.

Examining the Influence of Investment Firms on Bitcoin Prices

Investment firms are another major factor influencing Bitcoin prices. Large institutional investors such as hedge funds and venture capitalists often invest large sums of money into Bitcoin, driving up demand and pushing up prices. For instance, when the venture capital firm Andreessen Horowitz invested $25 million into Coinbase in 2013, the price of Bitcoin increased significantly.

Similarly, when the world’s largest asset manager BlackRock announced plans to create a working group to explore cryptocurrency investments in 2018, the price of Bitcoin surged from around $6,500 to over $10,000 within a few weeks.


In conclusion, there are several factors that affect the price of Bitcoin. Political events, changes in traditional currencies, supply and demand, exchanges and market makers, media coverage, regulations and investment firms can all have a significant impact on the price of Bitcoin. By understanding these factors, investors can make informed decisions and potentially profit from fluctuations in the price of Bitcoin.

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By Happy Sharer

Hi, I'm Happy Sharer and I love sharing interesting and useful knowledge with others. I have a passion for learning and enjoy explaining complex concepts in a simple way.

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