How Is Bitcoin Price Predicted? An easy explanatory guide

Bitcoin or BTC is one of the first coins to be introduced in the crypto trading world. Ask anyone about crypto, he will certainly talk about Bitcoin due to its popularity and how it earned massive benefits to holders. Due to its popularity, its prices fluctuate very quickly. In short, predicting its price is a highly complex process. When compared to stocks, crypto coins such as BTC does not have profits, company, or a balance sheet. So, the question is how are its prices mainly driven. Well, the answer is- Market Demand, Global Events, and people’s behavior. Though, there is no single method that is 100% accurate, hence, experts use a combination of these methods to predict its prices.

Continue reading the details below to find out what are some of the most common and basic ways to predict Bitcoin price.

How demand and supply affect Bitcoin price?

The basic “demand and supply” rule of economics governs the price of Bitcoin at its core. According to this rule, when the supply of a service or commodity is lesser than the demand, then the price generally goes up and vice versa. The factors to be considered when it comes to Bitcoin supply are presented below:

Well, this coin has a fixed supply of 21 million coins which means there will be no increase or decrease in the number of available coins.
Only through “Mining”, new Bitcoins are created. However, the rate of halves every four years. (This scenario is known as “Bitcoin Halving.”)
Since only a few coins enter the market, it can push the prices a little higher.

Factors that influence the demand:

More traders buying the Bitcoin and holding them.
When institutional investors such as companies and funds enter the market, it affects the demand.
When individuals use Bitcoin as a store of value, the demand of BTC affects.

In short, the price of Bitcoin generally rises when more people wish to buy Bitcoin, but there are a few individuals who wish to sell it.

BTC price prediction using technical analysis (Price chart study)

By studying the price chart and by undergoing technical analysis, many experts predict the predict the price or value of Bitcoin. This method usually focuses on understanding the past price movement, trading patterns, etc. The key factors that analysists look at are as follows:

Price charts
Trends
Trading pattern
Trading volume (BTC being bought & sold)
Support & resistance level

The common tools that are used hereby include Candlestick patterns, RSI which helps understand if BTC is oversold or overbought, and moving averages (price of BTC over time).

Other ways to predict BTC price

In addition to the price and tools mentioned above, some additional ways to predict the price of the said crypto assets have been discussed below:

Fundamental analysis: This includes real-world factors such as government regulations, Adoption of BTC by companies/countries, inflation or weakness in traditional currencies, and trust in financial systems. For example, if a country approves BTC or its economy is under crises, the price may increase. Or, if a government bans crypto, the price may fall.
Market sentiment and psychology: The price of Bitcoin is highly influenced by human emotions such as fear and panic selling, buying driven by hype, opinions formed via news, influencers, and social media.
On-chain data analysis: Under this category, the data is studied directly from the Bitcoin blockchain. In this analysis, the experts consider the number of active wallets, the amount of Bitcoins being moved or held, coins sent to the exchanges, and the number of long-term holder vs short term traders.

Key takeaway:

While there is no single way to predict the price of Bitcoin, you can still take a look at the past prices, trends, and patterns to figure out its future value. The reasons why its value remains highly unpredictable is because of the unpredictability of global events, emotions prevalent in the market also change quickly, large investors have the power to move prices suddenly, and crypto markets are always volatile.

FAQs:

How Much Will 1 Bitcoin Be Worth in 2030?

The cryptocurrency market space is highly unpredictable and volatile which means you won’t be able to guess what factors might start affecting its price in the future.