Bitcoin :the values - What determine the price of bitcoin?


How is the price of bitcoin been calculated?

 Price of bitcoin is actually calculated like how other currencies and objects value been calculated. Let's examine how we price an orange....

Well, it depends. As a starting point one would derive the price of an orange based on two things: how much someone is trying to sell it for, and how much another person is trying to buy it for. If John wants to sell it for USD 2.50 and Sarah is ready to pay USD 2.00 , there is no deal. But if they agree on a price that works for both, let's say USD 2.25, then the transaction will happen. If during a festive seasons where oranges are needed, the price will go up. Like the other side, if there is a drought the supply of oranges will become less, so more people are trying to buy less oranges which can also drive the price up. It's just like a demand-supply theory in economy.

Bitcoin and other currencies are a bit different from oranges in that they are what is called 'homogeneous' - one dollar is identical to another dollar, one Bitcoin is the same as another. Oranges can be vary in size and quality. The price of bitcoin or a currency is just what a buyer and seller will agree on.

Bitcoin's value work actually like how you hold your own currency. Currency's values is always change - million of people is selling and buying your currency on and off and it's affecting your local currency values.

*why does bitcoin- a digital coin - assets - has VALUE? 
The answers are very simple, it lays between the basis of economy: scarcity, utility, supply and demand!

Scarcity- bitcoin is rare and of course Utility- it has its function and utility and thus it has specific values. But what determine the price of the bitcoin are the Demand and the Supply!

Like gold, Bitcoin is also scarce: its supply is limited. There are currently 16.2m Bitcoin in circulation and the maximum that will ever exist is capped at 21 million. this making its scarcity transparent.

Thousands of merchants around the world has started to accept bitcoin as one of the payment and thus it grows the usefulness of Bitcoin

Price is determined by the market in which it trades: by supply and demand of course. This is the same ways as how the example above have shown.

However, when determining price, one must also consider the amount that buyers are willing to pay for future value of a specific item. In other words, if the market believes that the price of something - like property, a certain stock or Bitcoin - will increase in future, they are likely to pay more for it now. Bitcoin now is an evolving and improving technology. Many are optimistic that there are many other use cases to come. So what do you think about the price of the bitcoin in future?

Volatility - price change very often!

 It is not only Bitcoin exchange rate change from day to day. Many things too - stocks, currencies, oil and many product. The total Bitcoin market is still relatively small compare to other industries, thus it doesn't take significant amounts of money to move the market price up or down, so the price of a Bitcoin is still somewhat volatile.


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