I'm really tired of the clone posts asking things like "HOW LONG WILL BTC LIVE?", "IS THERE ANY FUTURE FOR BTC?", "IS BTC GONNA DIE", etc.
Before asking such questions I would recommend the panicing topic starters to look through the following facts.
1. What factors influence the price of Bitcoin?There are a number of factors that affect the price of Bitcoin over time.
The main factor is
market demand and offering. The basic principle of the economy is that if people buy currency, its price grows, and if people sell currency, its price falls. Bitcoin is no exception. In autumn 2013 the BTC price rose 10 times as a result of the huge demand from Chinese investors.
Another thing is that the
maximum number of Bitcoins is limited to 21 million. More than 16 million BTC have already been mined and more than 14 million people have wallets for storing Bitcoin. The number of wallet holders is growing rapidly, and since the amount of Bitcoin is limited, its price will continue to grow.
News in the media. Both positive and negative news in the media have a strong impact on the behavior of investors, and therefore the current price of Bitcoin.
Technical problems. Bitcoin has open source code, so anyone can explore it. New updates to fix weaknesses in the code can give a boost for price increase. Meanwhile, successful hacks or server attacks can bring BTC exchange rate down.
Political and economic events. In the era of globalization decisions made even in a single country can have a serious impact on the whole world. For example, the decision to accept Bitcoin as a method of payment in Japan caused a significant increase of BTC price.
High volatility, which is the degree of change of the trading price over time. It is the most important financial indicator in the management of financial risks. Bitcoin's volatility is now about 10 percent, but it is constantly declining.
2. What were the most significant fluctuations of the price of Bitcoin?In the history of Bitcoin there were several significant fluctuations of its value.
Technical reasonsIn February 2011 Mt.Gox began exchanging dollars for bitcoins. As a consequence, the price immediately rose from $0.05 to more than $1.
In February 2014 Mt.Gox underwent a DDoS attack on its servers. And since Mt. Gox controlled more than half of all Bitcoin transactions, the BTC price decreased by 40 percent.
International eventsBetween October and November 2013 many organizations around the world began accepting payments in BTC. Chinese investors began to massively buy Bitcoins. Not surprisingly, during this period the price rose from $120 to $1,150.
In December 2013 the People's Bank of China banned accepting payments in BTC, and the price went into free fall to $500.
Mass mediaIn April 2010 an updated version of the source code was published resulting in a 10 time increase of BTC price.
In April 2011 the Time magazine published an article about Bitcoin, where the author mediated about future prospects of cryptocurrencies. Shortly thereafter Bitcoin's price rose from $10 to $30.
3. What will happen with the price of Bitcoin?Theoretically, technical problems and limitations, problems with the code, political events and decisions carry potential risks for Bitcoin.
Nevertheless, at present
there are no clear prerequisites for its devaluation.
Bitcoin is quite young (less than 10 years old) and it has huge potential for growth.
Therefore, in order to learn more about current and future trends, monitoring the market and keeping abreast of the news is the best thing we all can do. Good luck with your investments.. and don't panic!