Bitcoin, the most successful Cryptocurrency ever. Bitcoin always stays in the news as the price of this keeps dipping or surging. In recent days we have witnessed around 30% huge price drop of this volatile digital currency.

And this had happened just after the China Banking Association warned its fellow bank partners about the risks of digital currencies. But on the other hand it is also true that many big institutions have already started adopting this digital currency.

So, the question is how this digital currency manages to be so volatile? How can it go at the peak and then suddenly drop at almost half? But before we get to the answers to these questions, it will be great if we get an idea of how Bitcoin actually works.

How Bitcoin Works

I have already told you that Bitcoin is a digital currency and it is totally decentralized. That means Bitcoin is not tied with any government or bank to regulate the use of this. It allows you to spend the coins they have anonymously.

Bitcoin miners are the responsible ones to create new Bitcoins. They use computing power for verifying the transactions of users. And in exchange for their work, they are also paid with Bitcoins. This is the reason behind many people becoming miners.

You can buy or sell Bitcoins using the US dollar on the Bitcoin exchanges. Any other fiat currencies will also do good for this purpose. There are a number of businesses, which accept payments with Bitcoins.

As I have said earlier that many big institutions are opting Bitcoin along with some other Cryptocurrencies. And the list of these institutions also has the name of some financial institutions.

Consider lines of computer codes. Each time they travel from one owner to another they need to be digitally signed. This is the basic concept of Bitcoin. You can make those transactions totally anonymously.

And this is one of the reasons why it is becoming more and more popular with time. Just the way you store your money in your wallet or in a bank, this thing is a bit the same for Bitcoins too. You can store your bitcoin both offline and online.

For storing your Bitcoin online, you need exchanges, and when you are thinking of storing them offline, you can get a hard drive with specific software. The resource or amount of Bitcoin is only 21 million.

As per the reports from the famous online Cryptocurrency exchange Coinbase, in the market, around 18.7 million Bitcoins are already in circulation. The very reason for this is still unclear.

What Determines Bitcoin’s Rate?

Satoshi Nakamoto developed Bitcoin in 2009. In a blockchain development by top web development companies, the transactions are usually recorded. It shows all the transaction histories for every unit. It also works as proof of ownership.

As I have mentioned earlier, Bitcoin is a digital currency, and it is not at all backed up by any government or central banking system. You may also have a misconception that buying Bitcoins is pretty much similar to buying bonds or stocks. But believe me, they are not.

Understanding What Determines Bitcoin’s Rate

As Bitcoin is not backed up by any government or banking system, unlike any fiat currencies, there are some factors that will not be able to affect Bitcoin. They are,

- Inflation rates.
- Monetary policy.
- Economic growth measurements.

These are the factors, which typically influence the value of normal fiat currencies. But when it comes to Bitcoin, none of them are applicable. The factors that influence the value or rate of Bitcoins are as follows.

- The number of competing cryptocurrencies.
- The whole supply of Bitcoin, along with the current market demand of it.
- The total cost of Bitcoin production through the very mining process.
- The rewards that are issued to the miners for verifying each transaction, which took place in the Blockchain.
- The exchanges Bitcoin trades on.
- Bitcoin’s internal governance.
- The regulations that are governing Bitcoin’s sale.

What Happened To The Bitcoin Price

On the 21st of May, a statement was posted on the official website of the Chinese Banking Association. As per the statement, due to the volatility of digital currencies, financial institutions should resolutely refrain from offering any kind of services using those.

Just after this statement, virtually all Cryptocurrency fell. On that same day, the value of Bitcoin was down over 70%, and the price became approximately $40,310 for every coin. The down rate of all cryptocurrencies was between 7% and 22% of their total value.

Along with this, the shares of Coinbase also dropped by 5.4%. In April, the value of Bitcoin was around $65,000, and after this incident, the value has become around $39,000 during the last week of May 2021.

Conclusion

This was all about Bitcoin and its evolving price rates. Contact app development company for being a Cryptocurrency app development, Bitcoin is always considered as one of the volatile digital currencies. The whole journey of Bitcoin has always been full of surprises. The Bitcoin lovers are waiting for the next surprises.