Why the price of Bitcoin is relevant

On the Bitcoin exchange rate, a large part of public attention is omitted. And rightly so, because the course combines all the information available in the market and gives a hint, what is the fundamental value of BTC has.

The history of the Bitcoin exchange rate is already huge. Alone in the first two weeks of the new year, the price of the crypto-currency heaved by up to 40 percent on the closing level of the previous year. The current year’s high mark at 41.880 US Dollar (USD).

The Bitcoin price history in US dollars in the month chart.

Also in the case of BTC-ECHO, we deal in the market update daily with the Course. But why are you talking constantly about the price?

Markets and prices

In the interplay of supply and demand, the exchange rate plays a crucial role. You could say that the price of an asset reflects the essence of what price the market deems appropriate. Expectations about the future value of play, the availability of the goods, the news, the information that is available, as well as the overall economic situation of a role.

Markets, then the buyer and seller together, and where supply and demand meet, a price. It can therefore be said that the pricing mechanism is exactly what markets do: they give goods at a fair price based on all information available in the market.


Pricing and Bitcoin

So, what is a fair value for Bitcoin? This question would probably be answered by each market participant differently. For some, Bitcoin is a digital replacement for Gold and, therefore, should be at least as much value.

This is exactly why markets are volatile. For a BTC was overvalued at 40,000 USD significantly, which is why it has probably sold. For the other BTC itself is valued at $ 100,000 and fair, you will also buy 40,000 USD. If the majority of market participants comes to the conclusion that the current level is too high, drops the course, since more sale than purchase orders to be placed and Vice versa.

In the end, it comes down to it, what is the Benefit of all market participants in Bitcoin looks. And in the case of a new Asset (reminder: Bitcoin is just twelve years old) may be the way to the establishment of ever bumpy. Considering the volatility, one can only conclude that the market has certain difficulties, to develop a fair value for Bitcoin. In other words: market participants disagree about what Bitcoin actually is and how much the Asset is ultimately worth.

However, the volatility decreases. While adjustments of the Rate of 30-40 per cent in the last cycles is still on the agenda, is the volatility (here shown in red), as measured by the standard deviation of the course, these days, about 19 percent.

Bitcoin volatility (red Graph) and price (blue Graph). Source: https://charts.woobull.com/bitcoin-volatility/

This is not least due to the fact that with MicroStrategy, Square, as well as derivatives, such as the Bakkt Futures and Bitcoin option seem to be more and more professional players in the market flows. This increases its efficiency, and takes away his volatility.

The Course is the most important Signal for the adaptation of Bitcoin. In principle, the price of Bitcoin is enough to determine is at what point of the market. Therefore, great attention should be paid to the Course to navigate.


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