Why does the BitCoin price fluctuate so much?

10 Oct 2017

In any economy where there trade occurs in terms of commodities, the value of the commodity is often governed by the supply and demand of the products to be traded.


Countries function in a similar fashion. 
The value of the currency is dependant on an Export to Import ratio. 
The ratio is positive if Export is greater than Import made by a country and the same ratio is negative if Import is greater than Export. 
A positive ratio ensures that the country is producing more value than it is consuming which causes a relative rise in the value of the country’s currency.
A negative ratio ensures that a country is producing less value than it is consuming which causes a relative decrease in the value of the country’s currency.

Bitcoin is a commodity that is traded for goods, services and value produced.

Bitcoin’s value is dependant on the intensity of demand and supply there is.
The demand is a market factor. 
The intensity with which the market needs the commodity fuels the demand aspect. 
Supply however is a limited factor within the Bitcoin economy since the number of bitcoins there can exist within the network is limited to 21 Million.

This often causes a difference between the buying and the selling price.

To answer your question, there isn’t any actual set price for a Bitcoin.
The price of Bitcoin is a balance between what price someone is willing to trade with to part from the Bitcoin and what someone is ready to pay to acquire it.

Bitcoin exchanges and companies that transact using bitcoins determine a lower and a upper limit around what a person in possession of Bitcoin is willing to sell it for and what a person is willing to pay in order to acquire it.

A price is determined after setting upper and lower limits between a seller and a buyer. A price is determined between the limits based on a pricing strategy that the company(exchange) employs.

More people, more exchanges, more traders and more business implies more variables which is aggregated to decide upon a price at which people can trade.

The price of Bitcoin is fluctuating because we, as owners of Bitcoin are actively taking part in its economy.


“Why is there a difference between the actual Bitcoin price and the buying and selling price ?”