How is the price of a bitcoin determined?
If you had bought €100 of bitcoins in January 2010 and sold in November 2013, you would have had €120,000,000.
It’s not bad, right? From €100 to €120 million … multimillionaire in 3 years with a laugh investment.
How is the bitcoin price determined for such situations to occur? Not only did it happen and has its explanation, but many think that a similar new situation is about to come.
Bitcoin as money
As we all know, money is what is accepted as a means of payment for a good or a service. Good money is expected to serve as a unit of account and deposit of value among other characteristics.
But … a moment! If a money does not accept it as a means of payment, no matter how great it is as a unit of account, and everything you want … is it worth something? That is why the value of money is not that it is closely linked to its acceptance, but is directly related.
The FIAT money (which is the official money like the euros or dollars among others), as we know it today, are not more bills and coins without their own value, already very far from when they represented a value in gold. They are endorsed and certified only by issuing entities.
Offer and demand
But, who determines its price?
The price of a bitcoin is determined by anyone who wants to participate in the purchase – sale process, essentially its users. That is, what ultimately determines the price of bitcoin, even if multiple factors influence it?
The bitcoin trade allows you to distribute it and benefit from it. As in other scenarios, the producers (in the case of Bitcoin: the miners) can propose a price by selling their bitcoins to the interested parties, reaching agreements.
There is no official or only bitcoin price
Once explained the above you will understand that since there is no single platform in the world to market (there are many and each one can have its operations) there is no world or only bitcoin price.
However, they tend to be equal. When there are very large differences in the prices of two exchange houses, whatever they may be and due to the nature of Bitcoin that allows sending money almost instantaneously, some people take advantage of this price difference to buy at the exchange house with cheap price and sell at the expensive price. This, which is something that is done daily, is known as arbitration, resulting in a homogeneity of prices in the different exchange platforms in just minutes.
Bitcoin as a means of payment
Something curious about Bitcoin, despite not having changed its source code in excess since its inception, is that it went unnoticed for a long time. In addition, the few who paid attention did not take it seriously enough to be a firm alternative to the traditional financial system.
Historical of the price of Bitcoin
Just 10 years after its creation, Bitcoin is also characterized by its high volatility. Throughout its short, but intense existence, a single bitcoin has gone from literally worth nothing to almost $20,000.