Topic: How does Bitcoin transaction Really Work? Why does Bitcoin price change? (Read 368 times)

Yeah, and because people are eager about it and about holding it till they see it fit. And they will see it as beneficial if BTC stays on the right track as of now.

If everyone decided to hold their Bitcoin, it would be because people consider it to be a good store of value. It is similar to holding gold bars. It can remain idle and still be valuable. And because it is valuable, it would create more demand from people wanting to hold it in their portfolio.

Giving a straight answer to your question on price, Value is a main reason price continue in the upward direction, Bitcoin increases it's capacity in value every year literally and a default reaction to that is in the increase in price, just like we see in Real estate, it's not rocket science but a simple economic logic.

The sale of goods, works and services (otherwise known as realization) is the transfer of ownership of the goods (the result of the performance of works or the provision of services).

Payment for goods, works and services is carried out by counter-transfer of funds (most often this is fiat currency, less often Bitcoin). A transaction is not only payment for goods, works, services, property rights, but also any movement of satoshi from one address to another. When making transactions, commissions are paid to miners. Miners ensure the security of the Bitcoin network.

The price of Bitcoin depends on supply and demand. Since the price of Bitcoin is denominated in fiat currencies, and fiat currencies become cheaper over time due to inflation, the price of Bitcoin increases over time.

After all, the supply of Bitcoin is initially limited - there cannot be more than 21,000,000 coins in the world (in practice, there are fewer, since some users have permanently lost access to their Bitcoins).

Some do buy in lumps, some invest no matter the price but gradually, trying to DCA, however, it all depends on what target you have and how much time and funds you've got to achieve it. It's all possible with crypto and BTC.

Normally, the price of Bitcoin operates with demand and supply and when the demand is high, it tends to go up but when it's lesser the price dips, well many beginners misunderstand the concept and only invest on Bitcoin when price falls so they'll take profits when demand is high but they're getting it all wrong, cause one mustn't wait for price to fall just to invest and take profits. In conclusion, the price of Bitcoin can never be stable, it must always fluctuate because it is highly volatile in nature and that's just it moreover one don't just cash out their profits at given increase in the price of Bitcoin due to high demand, using Bitcoin for investment option is for long-term purpose the person must have invested for about 4-10 years before thinking of taking profits when their's an increase during that period.

Yeah, leverage is a roller coaster for sure, and a risky ordeal.
And then again, nobody does have such an amount of BTC, but it would really be that way, albeit, with such a loud noise from such an event that even Satoshi would blush probably

I have technically got me on this same perception of thoughts but then I can only say when demand is high and the price of bitcoin increases, holders are most attracted to make translations maybe cashing out their profits or the price increase may be attracted to beginners which transactions at that moment maybe congested requiring transaction fees increase also bitcoin gaining price momentum when demands are higher than suppliers.

Regarding bitcoin's price depends on the supply and demand which have been discussed for many times here in the forum. About the price is I think it is like this, person A sold 1 BTC for $60k and person B sold 1 BTC for $59k and person C sold 1 BTC for $61k so we add the three price sell and then divided by 3 which is $60k and the average price that people selling their BTC is $60k. So if there are lots of people who rather to buy BTC for $59k then the price of bitcoin will decrease that's why it changes many times. For making it short, the answer that many people will give is supply and demand.

^
It's not even that simple. People say that it's supply and demand but it's a very broad term.
Take market depth for example. With bitcoin it's very low when compared to Forex or stock exchanges. This means that all large exchanges combined barely have 10% of all bitcoin in circulation available for purchase along with corresponding buy orders in fiat. So if you come to a single exchange with enough fiat money to buy half of what they have, you can double the price.

Literally if you were able to buy 100k bitcoin, you could make the price instantly go beyond $100k by draining all available offers. Less than 1% of total supply of bitcoin could double the price, but it works the other way too. Dumping 1% of the supply could cause the price to drop below $20k within minutes.

Then there's leverage where people gamble on exchanges with borrowed money. Dumping as little as 1% of the supply would liquidate these positions and make the price virtually lower than it should be. It again works both ways and buying 1% of the supply would also cause liquidations and move price tickers much higher than they should be.

so prices keeping other economic factor constant is determined by Market order on CEX?
This is why moving coins through the blockchain or in exchange for a service doesn't affect the price.
The actual price reflects the supply and demand order of the exchange.

coins moving from one address to another address does not affect the price
the price is based on the market orders of centralised exchanges. not the blockchain itself
many people keep saying "supply and demand" but thats just high school bad economics lessons

did you know i can deposit a small amount of my hoard and cause more market movement that 1000 people with collectively more coin than me
this is because of different market order strategies

ill give an example
1000 coin: shared between a group of 1,000,000 people
500 coin: my deposit

so here you would think the group has more market power then me. and the market has 1500more supply of coin, causing a 1500sell off to lower the price.. however...

imagine instead of me selling my btc once as a lump for USD, i instead done this
[BTC->ETH][ETH->USD][USD->BTC]
now all of a sudden on the USD->BTC market im treated as a buyer
now my funds will eat up half of the groups coin. and then in seconds i repeat the arbitrage route and done it again.
all of a sudden i have taken all of the groups coins so they are no longer part of the possible sell pressure.

i can then keep looping it and eat up other sell orders and so cause a price rise

what you need to learn when most order lines of a market order book is 0.001btc, throwing 500 coin around can eat through alot of order lines causing more affect. and due to arbitrage opportunities of circling other order books to get back to the other ide of the original order book. you can repeat the effort, generating more 'trade volume' without needing multiple allotments of coin amounts

also instead of being a market 'taker' i can put my order to be a market 'maker' where it creates walls
this is why you see the market prices stay within a certain range like hit a support bottom or a resistance top for a period. because certain whales dont want the price to go down too low or up too high for that period. so they keep prices in a certain window

the market is also not controlled by 'supply' because even if an exchange has 1m coins deposited. not all of those coins are on a active order book, nor are set at the spread of the market price, so they may never fill.. so even if a exchange has a supply of 1m coin its only trading 0.001btc at any millisecond and sometimes its the same buyer/seller on a arbitrage loop rather than the 100m registered users

I doubt you understand my question.
I understand how the forces of demand and supply affect Bitcoin
Just like if I trade my phone for a service it wouldn't affect the price and would remain same.
Yeah I know that prices increases when the forces of demand exceed the supply so suppliers would want to sell higher and vice versa.
I guess I didn't coin the question well
What I meant is if everybody holds but move their coins to different address exchange for a goods or service the price would remain unchanged because it's already absorbed before getting to the public market right?

I guess I was muddle headed when I created the thread
Though I have come across nice answers, most were thoughts I had before but I feel is 'limited'

Sigh I still haven't found what am looking for.

Maybe i should just remind you of these two fact checks to make you have a recall to make you know why it all happens this way.

1. The architectural framework on how bitcoin was built is found on the whitepaper blockchain technology.

2. Bitcoin will majorly have to depends on its market demand and supply and either of this is determined by the market equilibrium of the buying and selling rate from its users, which is why it will always be volatile.

First of all, you don't actually need to understand how a rocket works to fly it to the moon, what matters after all is that you know how to fly it, and that's all that matters.

Your questions makes absolutely no sense to me to be honest with you, because I see this things as stuffs even a child should understand the differences.

Price of bitcoin changes due to demand and supply, the higher the demand and shortage of supply, the higher the price goes, and the lower the demand and the availability of high supply, the lower the price goes, this has nothing to do with spending or exchanging bitcoin for goods and services since in this case, you are not exchanging bitcoin for fiat money, but for a real item, physical item, and the worth of this item, and the number of bitcoin you pay for its also have to be on corelation to the worth of bitcoin in fiat currency.

This things are very simple to understand, sending and receiving bitcoin from wallet to wallet is counted as transaction yeah, trading is different since you either give bitcoin for another cryptocurrency, or another cryptocurrency for bitcoin, this process can be counted as transaction as well, but it's worth knowing that most of bitcoin trading doesn't happen on chain, but happens off chain through centralized platforms and exchanges.

Sometimes the level of knowledge is not being measured by rank; beside, the question the Op asked was out of curiosity, and what you explained in terms of how transactions are being handled on the blockchain is what I believe the Op already knows, judging from his post-history and the little technical knowledge he has shared.

The question asked most times I also do wonder about it, aside from the law of demand, what more triggers and adds value to bitcoin in terms of how it should be priced, and I have come to the conclusion that the price we add to each bitcoin is based on how much we think it's worth and not just how much it's being priced in the market. Which is why some people still believe that bitcoin is undervalued. Some argue that it's overpriced; how you picture and price it depends on how much value you see in it.

Price is determined by trades that happen on exchanges. If you want to know the price of Bitcoin now, you'll visit a coin tracker like CMC or coingecko, what this websites do is take aggregate of the last traded price on several exchanges and give the price of Bitcoin. If I traded 1BTC for $63,500 on binance that will be the price on the exchange, it may be slightly different on some other exchanges but for the most part, it's fairly equal.

An increase in the amount of those who own Bitcoin builds demand and helps boost the price, but if we had just 100 Bitcoin owners and they've all held since 2009, the Bitcoin price should be at zero now. The idea of holding is more of an advice not to panic sell and crash the price but hold through down markets. Being used for actual utility helps the value of the asset.

It’s really surprising that you are a senior member of the Bitcointalk forum and still don’t know the basics about Bitcoins. Bitcoin transactions happen in blockchain. In simpler terms, blockchain acts like a path through which Bitcoins are sent or received. You can watch any video on YouTube to understand the graphical representation. Now regarding the price, then it changes due to the fixed supply of Bitcoins. People buy and sometimes sell the coins, as Bitcoins are fixed, hence the price goes up or down to maintain the market demand.

Well actual the value of price of Bitcoin never changes 1BTC=1BTC always.

So how does the value of Bitcoin created which is basically by demand and supply so on an exchange of there's buyer and seller matches the price then we consider it as value of Bitcoin for example let's say value is 60K and if no one willing to sell their Bitcoin for anything less than 80K then the price of Bitcoin will become 80K and this just changes to every individual exchange and when somewhere 1 Bitcoin is available for less than 80K then everyone is gonna be there to buy the Bitcoin then that will be the value of Bitcoin.

Now if you skip the middle part which is fiat now dealing with goods and services directly then you need to do the math to find out the value of Bitcoin that you need to send by referring to the market value which is basically the trading value on an exchange or if you wish to pay 0.01BTC then it makes of 1 gallon fuel to be sold at 0.01 as long as someone keeps buying it for 0.01BTC if someone offers the same product for 0.001BTC then the value of product will down to 0.001BTC

In essence Bitcoins value on direct exchange for a good determined by the rate by both parties agree upon to be the value of transaction.

I don't find any complications in understanding how transactions work and why the price changes.

A transaction has nothing to do with the price in general, for example, I may have 2 Bitcoins in one of my wallets, and I send them from that wallet to another wallet that I have. Will that affect the price? No, because I'm simply taking money that I own from one place and placing it in another place. For buying goods, it's basically the same thing. You send 0.01 Bitcoin to a merchant for buying a good, you are simply paying the price for what you are buying, and that doesn't affect the price because you are not selling your Bitcoin to someone but you are exchanging a specific amount of your bitcoins to get something.

The price changes when there are two parties, one is selling and the other one is buying bitcoins and not some other good. For example, I have 1 Bitcoin, I originally wanted to sell it for $65,000, but I saw that multiple buyers are waiting to buy that Bitcoin. What do I do? I increase the asking price because I see there is a lot of demand and since the supply is limited, there will be someone willing to pay me more than $65,000 for it.

Similarly, the price decreases when I want to sell my Bitcoin for $65,000 but I see people aren't lining up to buy my Bitcoin so that I can increase the price, but they are bidding lower and waiting instead of jumping to buy at a higher price, in that case, if I need to sell it, I will lower the price and accept what the market is asking at the moment.

It's simple supply and demand, nothing more.

If I get you right, I would simply say trading are Bitcoin dealers who are opinion to quick selling and quick buying of Bitcoin at any moment, they serves as the immediate demands and suppliers who does not acquire the Bitcoins to stock like the investors may do on the basic of buying, holding and accumulating for a period of time precisely on a long term with no quick selling of their Bitcoins.

Just like what others have said the value of bitcoin is actually the same which is one bitcoin equivalent to one bitcoin, it is the fiat equivalent place on it that actually varies and this is mostly done by individuals or market makers. They set the price to an amount they think is suitable for them and buyers buy for an amount they think is ok for them. Then this actually increases or decreases just like the normal commodity we have, if 10$ was placed on it and then people start selling off in large chunks for that amount (supply) then later since the supply is actually large I can buy anywhere and people are eager to sell I can just simply lower price to like $9 and this will make desperate sellers to sells since they want to just sell.

Now in terms of a demand I have this bitcoin for that same $10 and I see lots of people actually asking to buy it for an amount as a marketer it is just reasonable that I sell to them higher since they are eager to buy and I have it so I can simply increase my price to $11 to make money out from the demand as at then. This is exactly how the demand and supply chain for every product is .



If everyone holds bitcoin which I will tell you will never happen because we are all different and have different strategies to follow. But should this happen it simple bitcoin will be more scarce and we all know what scarcity causes most especially for a thing which every one wants it simply increases the price place on it,

Yes a transaction is simply a movement from one address to another which is registered or stored  on the blockchain, so lack of transactions will be bad for miners and subsequently for the network

When someone buys an object for x amount of fiat, its price becomes that only. Someone might want to buy it at y(where y
When orders are coming one after another the last traded price is the last one from the data from all exchanges being monitored by an aggregator website like coingecko and others.

I can decide to sell bitcoin at a hefty z price (z>x>y) but then I would not get any buyers unless some fool wants to price it so much and then the z becomes the price.

To be honest, fiat prices are set by the buyers and sellers, 1BTC is always 1BTC there is no "standard" to compare it in fiat.

Many people think that if everyone holds Bitcoin, the price will go up because the demand on this coin is growing but I personally think that if we all hold Bitcoin, then this coin will die. What's the point of having money if you don't use it? There no point because money needs to be in circulation, constant transfer is what makes and keeps it active, you buy things with Bitcoin, you fund business with Bitcoin... This is the lifeforce of Bitcoin and every currency to my mind because Bitcoin is a payment method, by holding it, we will kill it as a payment method.

Most of today's trading is done on centralized exchange. We deposit coins on one exchange, this exchange collects it and gives us the opportunity to buy/sell Bitcoin without making an on-chain transaction. It's traded virtually on the platform.

I think that price is created mostly by whales. I pay $617 in 0.01 BTC because that's the current price, not because I think it is worth it. Btw I got your point.

You asked a very nice question, more like a newbie question to me though, but sometimes we just have to speak our mind and get answers. Well price, price, price, most people don't actually understand what moves the market. Yea we most times say demand and supply moves the market but then, what actually is the demand and supply we speak of? It's literally me and you. The people participating in the global market are the ones driving the market.

The movement we see are just a narration of their actions. When we buy or sell Bitcoin, we are in one way or the other creating a kind of liquidity. This liquidity is where our money lies and it's like a fuel for the market. When the market has enough liquidity from either the buy side or the sell side, it drives faster more like a respond to what created it. Now looking at the market when let's say the sell side liquidity has been fueled, the market then dips. Again,some investors gets scared after seeing this then rushes to sell off. This then adds even more fuel to the market creating the dips we see... And not until the buy side has enough liquidity to push the market back upwards, the dip will still hold its stands.

Now let's come to what happens when everyone holds.. it's obviously is going to put the market on hold too. Just use my explanation for how price moves In the market using peoples actions. Now what happens when there's no action from anyone because we are all holding? Price will remain stagnant. But truth told, it's likely not possible for everyone to have same mindset and hold their coins. Some will get scared when the market remains on a spot, businesses will want to purchase shares, and no one will want to remain in an investment where the price is stable..

To be honest, the market is broad like I said, and works more like an ecosystem. Bitcoin needs other cryptocurrency or forms of currency for it's Market to buy or sell. Same as others need it to move also in price crating the liquidity in the market. If no one is selling or buying it creates a balance between demand and supply literally equating price to zero. I don't know if you get what I mean. Though this is the way I see it from my experience with the market.

When bitcoin is being moved to an exchange, the market interprets it as an intention to sell and that can have a negative impact on the price, but of course, it has to be a large/significant number. So that will mean either a lot of people are transferring to an exchange at the same period or a very large amount of bitcoin is being moved to an exchange, just as we saw recently with the German government.
Also, the amount of transactions in the exchanges may be a factor. When more people are selling their Bitcoin they move to exchanges or convert them to stablecoins, which would mean a reduced demand for bitcoin and that might also affect the price depending on the volume.

Also, the perceived motive of the transaction is a factor. Moving a bitcoin from one wallet to another can affect the price if the market feels the owner(s) have a motive to sell. If a wallet with a large sum is transferred to another wallet that the owner is known for buying bitcoin, the market might interpret it as a sale and that could also affect the price.
Generally, I feel it all boils down to how the market interprets the transaction, that is why FUD plays a role.
 

Since we're speaking hypothetically, if everyone holds their bitcoin including the institutions and exchanges who hold the most bitcoin, I believe bitcoin price will hult at the last traded price. It won't go up or down until someone decides to sell.


Selling or buying (trading) of bitcoin is still a transaction. You sold for a fee and you also sold for a fee and it is in the blockchain, so its a transaction.

Transactions don't affect price even it is one of Bitcoin utilities. Transactions used for payment is more meaningful and is good example of Bitcoin utility than only Bitcoin transactions between two Bitcoin wallets, without any trade purpose like paying bills, buying house ...

Transactions themselves don't affect price but purposes behind these transactions have effects on price.

Like a transaction from very old wallet can be used as fud to affect price but if you make a transaction from new wallet in 2024, people will be not panic about it.

Transactions don’t really affect the overall price. It’s mostly the trading volume that impacts Bitcoin’s price since there’s a massive amount of money flowing in and out. As for Bitcoin’s current price, it’s based on the movement within exchanges, not individual transactions.


No, it doesn't affect the price.
Yes, it’s all about supply and demand. Like I mentioned, when there’s a strong buying or selling force, it impacts the price. That’s why we sometimes see pumps and dumps—sudden spikes in buying or selling pressure. On normal days, Bitcoin’s price still moves, but it’s much less volatile.




Definitely, it’s subjective since the major reasons for price movements often involve speculation. News, whether positive or negative, especially on regulatory aspects, plays a huge role in driving Bitcoin’s price up or down.


It's bad, as it defeats the purpose of a decentralized blockchain. It’s meant for transactions, and if everyone just holds, it becomes a stagnant asset, which makes it pretty much useless.
.

Of course, all involve transactions but in different purpose. However, on exchanges, that’s where we really see price movements. Like I mentioned, when people speculate, it can easily move the price (up or down). The old saying, "buy the rumor, sell the news," is how traders operate—they’re just playing with the price to profit. But, of course, not everyone is profitable. There are also losers due to wrong predictions or judgments.


Now you know, so just HODL.


Welcome buddy, and welcome to the bitcoin world.

Well firstly Bitcoin movements is not affected by buying and selling goods or services
And then the price of Bitcoin is affected by a variety of things one of which is the supply and demand which you have already stated above another thing that affects the price of Bitcoin is the investors
If there's a news that shows that Bitcoin is going to be on a bullish trend or other things that may affect  the price of Bitcoin positively the investors tend to buy more Bitcoin and this increases the price this also works viceversa because if there's a negative news about bitcoin the investor may then decide to back out and sell bitcoin which reduces its price
There are also other things like
Inflation
Wars
Pandemic
Government policies
Well at the moment these are the only ones I can think of right now

Now for your second question yes
If everyone holds it will be bad for the market not because the price will reduce
No
But rather the price will remain stagnant and stagnation of the price will affect the growth of Bitcoin
But this can never happen
There is always someone who is going to buy and someone who is going to sell bitcoin so you shouldn't worry about that

The price is created by our perceptions, do you think 0.01 BTC is worth for $617? if you say yes, that's why you willing to sell it for $617, if you think it should be higher, you will not sell it and you're fine to wait as long as you find someone that willing to trade for x price.

No, exchanging for service not counts as a transaction.

Transaction is when you only move the coins from one place to another, not necessary you get something after moving the coins.

Exchange, trade, sell, buy, etc you name it are the same thing.

Okay so I was working on a script on Timelock
Well practicing should be better used and in the process it hit me
How does transactions affect price?

Like does exchanging Bitcoin for say a Goods or service affect price? (I doubt it does)
So what now affect price
Yes it's the forces of demand and supply
The more the demand the higher the price but how does this differ from exchanging Bitcoin for a goods or service.
I have been looking at Bitcoin from the lense of trading and just found out about that

Like am curious how's the price really affected.

I don't know if I was able to coin my question well though
But why do price move, is it subjective?

Okay this is the first, now the second I'm a fan of holding but what would happen if everybody holds Bitcoin
'If' that is hypothetical. Wouldn't that be bad for the Blockchain.
.
Moving Bitcoin from one wallet address to another counts as a transaction
Exchanging for service is a transaction then what's trading or selling or buying.

Sorry everything is just all over the place, I'm just shocked I don't really understand this or maybe I'm just lacking Milk



I realised I was aiming for the moon when I don't even know how the Rocket works.


Thank You.