Bitcoin exchange rates, though easy to check and record at some given point in time, are difficult to predict and forecast. I would not be amazed if Bitcoin were to rank among the top 5 most volatile trading instruments, when it comes to exchange rate fluctuations. So why does it oscillate so much, and how does the Bitcoin exchange rate work? Let us try to answer this here.
Who Controls: How Does the Bitcoin Exchange Rate Work
So by now, all of us know that Bitcoin is very volatile, it never sleeps, it is unpredictable, is it vulnerable to market news and the story goes on! But how does the Bitcoin exchange rate work?
Bitcoin is a decentralized currency and as such it is not regulated by any government or other authoritative body. However, it has a fixed number of assets that can be generated by use of peer to peer computer networks, and as such the supply at the end of the day is fixed, that is, it cannot go beyond a maximum. Now this is the most important and most dominant factor that drives and controls the Bitcoin exchange rate and decides on how the Bitcoin exchange rate works, the limited supply.
Facts: How Does the Bitcoin Exchange Rate Work
New Bitcoin tokens are always generated by the process of mining, and exchanges, they have their own dedicated machines and servers, to mine new Bitcoin all the time. However, there are some variable features that differ from exchange to exchange such as:
How much of an exchange can be mined in a given time frame?
What is the number of buyers and sellers at a given exchange at a particular time?
What is the ratio of Bitcoin to other cryptocurrencies that the exchange offers?
What is the maker taker fee for the exchange?
What is the reputation of the exchange at some point in time?
What is the geographic location of the exchange?
What is the net balance of an exchange at some point?
All the above factors interlink with each other, in a mesh form of haphazard criss-cross, affecting each other directly and indirectly, so as to decide what the Bitcoin exchange rate will be at some point, and determining how the Bitcoin exchange rate will work for that particular exchange in the near future.
How to Use: How Does the Bitcoin Exchange Rate Work
By now, you would have understood that it is beyond a normal trader to calculate what would be the upcoming Bitcoin exchange rate for some particular exchange, even though one understands the maths behind it completely. However, online resources like executium.com, that are cheap and easy to use, are there to our aid for such reasons. They not only help forecast such measures, but they also guide their clients as to what would be the best time and best investments to be made, with the sole target of profit making at the end of the day.