Unlike investing in traditional currencies, Bitcoin is not issued by a central bank or backed by a government, so the monetary policy, inflation rate and economic growth indicators that usually affect the value of any fiat currency do not apply to Bitcoin’s pricing system .

The following are 4 main factors that affect the price of digital currency to help you understand the trend of digital currency price. For details, please refer to the relevant reports published by the US website “Investopedia” which focuses on investment affairs.

Supply, Demand and Scarcity
Like other currencies, bitcoin currency as a whole is affected by the process of supply and demand, which is a major economic principle, so if the demand for bitcoin decreases, its price will fall, and vice versa, if demand increases, bitcoin The value of the coin will also rise.

Furthermore, the price of Bitcoin is linked to the scarcity factor which drives up the price and this is one of the factors that led to the price of Bitcoin rising to its highest level. The maximum output of Bitcoin is limited to 21 million, which is relatively low compared to other digital currencies. At the same time, its demand has increased in recent years.

speculation
Speculation is one of the factors that greatly affects the price of Bitcoin and causes it to rise or fall dramatically.

Speculators are eager to make quick profits trading bitcoin, so they buy and sell bitcoin very quickly and frequently, causing short-term fluctuations in its price.

Generally speaking, rapid and strong fluctuations are one of the characteristics of digital currencies, and it is this characteristic that attracts the attention of traders, because it creates opportunities to make money through short-term trading, but this is bound to be accompanied by more high risk.

development of legalization
Some countries still do not recognize the legality of Bitcoin, and some countries prohibit the use and circulation of such currencies.

Cryptocurrency prices tend to react quickly to any decision on legalization or banning, for example, when Japan announced that Bitcoin was considered a legal instrument of exchange, its price rose sharply in just 24 hours. Previously, Japan accounted for only 1% of Bitcoin trading volume, but when it decided to legalize cryptocurrency trading, this proportion rose to 6%, and even reached 55% of the total global cryptocurrency trading volume within a few days.

At the same time, other countries, such as China, introduced very strict restrictions to prevent Bitcoin transactions, which at the time had a very negative impact on the price of the currency.

Political event
In this world, any political event that seems to have nothing to do with a cryptocurrency can significantly affect its price.

Digital currencies benefit from a shake in confidence in official currencies, for example, unrest in some countries has led people to use digital currencies as an alternative to traditional government-issued currencies because they fear that political and economic turmoil in these countries will cost them materially , and they have lost faith in these government-issued fiat currencies.

These cryptocurrencies are often seen as an alternative asset to traditional government-backed currencies, so when investors lose confidence in their fiat currencies due to economic or political developments, they can turn to bitcoin, driving up the price of such currencies .

Some experts believe that when things get worse, digital currencies can replace actual gold holdings as a safe haven for assets. Although the World Gold Council believes that the price volatility of such assets is too large to undertake this task, the analysis It is widely believed that this possibility will rise further with the possible turmoil in the global political situation.

Bitcoin’s recent trading situation has indeed attracted widespread attention in the market. According to Glassnode’s report, the total amount of Bitcoin’s on-chain movement accounted for 3.8% of the total supply, a figure that hit a record high and even surpassed the wave of funds fleeing last year triggered by the collapse of FTX.

This shows that the Bitcoin market is undergoing a massive reshuffle and redeployment of funds. $30,000 is an important psychological support level
The most active level in this wave of trading was at $30,200, where investors appear to be choosing to trade. Glassnode’s analysis also specifically excludes transfers within exchanges to more accurately reflect real market volumes. This shows that new external funds are indeed being injected into the Bitcoin market, and it also confirms the conclusion that the stock prices of exchanges such as Binance have soared in recent days.

On the technical front, Bitcoin found immediate support near the $30,000 level, which is also an important psychological support level. A recent series of doji and gyro candles above this level suggests that bearish momentum has weakened and could turn in favor of the bulls. Moreover, on the four-hour time frame, an ascending trendline acts as resistance, indicating the possibility of a bullish breakout.

However, it’s worth noting that the 50-period exponential moving average near $30,400 could provide resistance, while the relative strength index and moving average convergence-divergence indicators also suggest a neutral stance. If Bitcoin consolidates between $30,400 and $30,000, we may not see major price movements.

If there is a bullish break above $30,400, Bitcoin could rise to levels around $30,900 or even $31,500. On the other hand, a break below the $30,000 level has the potential to push Bitcoin price towards the $29,500 level.

This wave of foreign capital entering the market is likely to be related to the slowdown in U.S. inflation and the friendliness of the U.S. Securities and Exchange Commission (SEC) in cryptocurrency regulatory policies. With the cooling of macroeconomic risks and the boost of investor confidence, the investment attractiveness of cryptocurrency assets has increased significantly. The chairman of the SEC has also made some enlightened remarks recently, and the regulatory environment for the cryptocurrency market may be improving.

But we should also note that after this wave of trading, the price of Bitcoin did not continue to rise, but fell back from $31,000 to around $30,000. This shows that the internal strength of the market is not stable, and there is a certain selling pressure. In the short term, the price of Bitcoin may fluctuate in this range.

On the whole, it is positive that the capital side of the Bitcoin market has improved, but the bull-bear game is still going on. It remains to be seen whether the transaction volume can be translated into a price increase, and the price volatility of Bitcoin may further expand in the future. As investors, we must remain rational, view all kinds of radical sentiments with caution, and wait patiently for a clear direction of the market.

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