Technology is a wonderful innovation that has brought great revolution throughout our history. It has advanced from an ancient old currency to a digitized version of money. Now it sounds like there is a problem in the crypto world. What should be going uphill is instead tumbling downhill with at an alarming rate. And instead of the safe haven that they were supposed to be, they have become the dangerous ground.
Bitcoins were introduced into the market to take over the centralized system where the government and other bodies used to regulate the economy and currency. Hence, the bitcoin innovation nullifies that control. But as it climbed its way up the ladder into people’s minds, in the same manner, it is also drastically declining. Due to modern innovations, people are too used to easy work and do not feel like working hard. However, Bitcoins involve a lot of work and time investment.
Now one must wonder what factors are responsible for bitcoin’s value
Demand and supply of Bitcoins in the market
There are a lot of factors that determine the price of Bitcoins. The demand and supply are the primary factors that matter in a business. As the saying goes on “Simple Economics and simple logic”. The Bitcoin prices are directly proportional to the demand and supply for the coins present in the market. When demand increases, the supply decreases and vice versa. Now the supply of bitcoin is affected in 2 ways-
First, the protocol of bitcoins allows the new bitcoins to be introduced at a specific fixed rate, which is designed to slow over time.
And second, that the supply may also be affected by the number of bitcoins existing. The bitcoins are no longer created once the count reached 21 million.
Once they reach the existing value, the prices of the bitcoins depend on if they are considered to be practical, legal and in demand.
Cost of production through Mining
So, what if they are virtual, Bitcoins need to be produced, and they involve a cost of production, the electrical consumption is the main factor. Bitcoin mining involves solving complex mathematical algorithms which are solved by the computer servers around the world. Only one bitcoin block is found by solving the bitcoin algorithm, that happens every 10 mins. The more people join in, the more complex the next algorithm is made.
Just like in stock marketing, the cryptocurrency investors trade cryptocurrencies with other monetary availabilities. The more popular it becomes, the more attention it gets, and more participants get involved.
Contrarily, a value of bitcoin can drop to zero with other factors like the regulations and legal matters affecting the popularity of bitcoins and other cryptocurrencies. Now with the rapid popularity of bitcoins, the security commissions around the world are in conflict on whether to support it or be against it, which creates uncertainty.
Bitcoins are not used actively by everyone. They have failed to fulfil the purpose they were created for. They are accepted by some and used by some, as the transaction fees increased from their original value. There are the obvious related risks with them like hacker’s interference.
Also, they are not used by everyone in their households due to their complex technology. In all the Bitcoin circuit has fused out.If the value keeps on tumbling down, then bitcoins will soon go off-market and become extinct.