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Factors influencing Bitcoin exchange rate in 2017: part 1

09/05/2017 00:00
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The investor who has paid attention to the option of profitable in investment in Bitcoin is sure to run into the question about factors influencing cryptocyrrency exchange rate and which factors to take into account to forecast Bitcoin price in future?

The traditional notion of “price origin”, lying at the fact that it is defined by the balance of offer and demand, may sound to generalized and undefined. In order to adopt right decision investor needs to know which factors to take into account and which materials to use for adequate assessment of digital currency exchange rate and its perspectives. In other words one needs to know the factors forming general corridor of exchange rate fluctuations for long term period. All these factors can be obtained from Bitcoin market analytics.

But before reviewing the factors influencing the cryptocurrency price it is worth reviewing current situation at the market of cryptocurrency “first born”.

Bitcoins reforms: grounds and methods

Spite the fact that of Bitcoin exchange rate general growth for last few months, several break through managed to touch investors nerves. Experts prone thinking that existing exchange rate fluctuation is caused both by speculative activity- the efforts of “bears”, which would have dropped the exchange rate, accompanied by lesser panics if not to take into account difficulties of Bitcoin as payment system.

Simply saying it goes about network loading capacity, which remained unchanged from the moment of cryptocurrency appearance. This loading capacity is already not enough for constantly growing network together with constantly growing amount of transactions among Bitcoin community, who sounds too pressed at traditional block chains. This causes the growth of commission, which especially discriminate small transactions and financially unsecure delays when confirming foreign currency transactions.

This problem can be solved by means of Bitcoin protocol renewal. But this arise the issue about the way of doing it. Bitcoin Core prefers soft update like Segregated Witness, while its opponents insist on hard update like Bitcoin Unlimited.

Bitcoin is undoubted leader among vast cryptocurrency community. On the one hand it can be pressed by nearest competitors. It is not hard to notice during the assessment of highly popular altcoins during last few months that Bitcoin conversion rate has significantly changed for several types of digital currency. Some currencies became several times expensive.

On another hand in case if Bitcoin runs into significant it can destroy trust of wide community to cryptocurrencies in general. That is why it is extremely important to conduct more quality modernization of old components of popular digital currency software mechanism. It is evident that society recognizes more the reality of crisis threat.

Cryptocurrency society take appropriate measures on problem resolution and experts are sure that Bitcoin will overcome crisis in its development.

This is a general outline of today situation at Bitcoin community. There is no doubt that most participants have a lot of questions to ask. With time we will provide you with new changes in this niche. Let’s return now to the main topic of this article and start reviewing factors influencing Bitcoin exchange rate in 2017.

Factor 1. Scalability completion stage

Year 2017 provides with all prerequisites of Bitcoin protocol update issue resolution. The notion of scalability has been making negative influence over cryptocurrency position for many years. Blockchain reform will become the end of Bitcoin transactions difficulties and price volatility and will become the start of new phase of Bitcoin development.

There is one significant problem. For now there is no exact information about the total of arguments between the adepts of various ways of protocol renewal.

Besides this the situation becomes difficult due to the fact that decision is adopted not by usual voting of cryptocurrency community members but by means of hashrate voting. In other words the resolution will be adopted by Bitcoin miners i.e. by pools which will unite most of the miners. The biggest weight will have the votes of the owners of the biggest mining capacities, who might reinforce pool position in case if their position corresponds to the position of pool management. In other case the owners of bigger hashrates will move to another pool with opposite position and use their votes in new community. 

It is worth mentioning that most miners will entrust their votes to pool management due to the following reasons:

  • trust;
  • absence of own opinion on the stipulated matter;
  • indifference about the result of argument about future of Bitcoin.

That is why it is not so difficult to understand the importance of management opinion especially if it is related to big pools.

Factor 2. Big Bitcoin popularity among Bitcoin large and small scale customers

There are people who use Bitcoin for their business conducting. There is someone who use Bitcoin as a payment mode. Someone uses cryptocurrency for trans-border payments without extra formalities and limitations. Other people consider it to be the most convenient way of goods payment and money transfers. While other users like it due to their personal preferences.

At the same time there are people who offset the option of Bitcoin usage (it especially concerns third world countries). The reason lies not at the absence of necessity of digital currency but at the absence of significant reserves of it.

As soon as potential customers turn into real ones, the mass demand for cryptocurrencies increases. Of course that demand for the asset is directly proportional to its prices meaning that growing demand - i.e. growing amount of users inevitable causes this assets price growth.

It is also worth mentioning that the speed of digital coins mining might be lesser that the speed of their withdrawal at the account of long term investment. Such situation will cause the decrease of market offer and will prompt price growing.

Finally the psychology of economy tells us that waiting of inflation can cause the inflation. As for Bitcoin point it is possible to mention the expectation of bigger price growth can cause the increase of demand for coins. While such demand will be justified both by the wish to increase savings and fear to lose the chance of savings increase due to the price growth.

Factor 3. Increase of trust to Bitcoins on the behalf of large scale investors, regulators and manufacturers of goods and services

The approval of Bitcoins by the range of countries large scale investors and financial regulation departments prompts its price growth in 2017.

The expectations of such situation development are rather high, but can be only partially implemented. Bitcoin analyst have put a lot of hopes for the registration of ETF stock exchange by Whinklewoss brothers at trading site titled as Bats BZX Exchange, which would have allowed Bitcoin to enter American stock exchange market. But one month and half their application had been declined by US Securities and Exchange Commission because of high level of manipulations at cryptocurrency market.

Such turn warns from extreme optimism, while Whinklewoss failure doesn’t become critical failure to the perspectives of reviewed virtual currency. The resolution review is possible as well.

Despite negative resolutions on the behalf of regulators, the amount of large scale organization using Bitcoin for transactions conducting and transactions payment is constantly growing. One can say for sure that the amount of large scale and small scale companies using digital coins for the payment of goods and services. For example now one can travel along US and other states by exchanging cryptocurrency for tickets, hotels, food and other. In other words with BTC it is not obligatory to have fiat money.

Such international money transfers like Western Union can also pay attention for Bitcoin usage for making transborder transfers.

In general large scale investors treat Bitcoin as reliable asset allowing to protect their money from various currency risks. Some experts are prone thinking that the risk of Bitcoin depreciation is lower in comparison to the risk of gold depreciation. Moreover the potential of Bitcoin potential is bigger than the one of gold. It is especially important on the condition of really hard financial drop downs at international level (i.e. political, military and especially financial ones). One way or another cryptocurrency is more mobile that physical gold.

All these factors stimulate both Bitcoin growth and allow periodical drop down depreciations. Such depreciations help currency to encounter faster currency exchange rate restoring.

In some way Bitcoin has got official approval from the range of developed countries:

  • US has approved it to be stock exchange good;
  • Japan has officially approved it as payment mode (Japanese authorities were the first ones in the world who did such step).

As for Ukraine due to the absence of bans on the behalf of Ukrainian authorities and local community efforts popular cryptocurrency has been reinforcing its position and popularity by constantly increasing the amount of users. Several years ago Ukraine stayed in the tenth of countries with the citizens actively using crypto coins. Now it has shifted to the first five. Moreover Ukrainian authorities pay great attention to the development of block chain technologies, which prompts greater polarization of cryptocurrency in country.

Taking into account economical complexities and high level of information about cryptocurrency society lot of Ukrainians actively invest their savings in Bitcoin. The announcement of option of BTC purchase for UAH and adding BTC/UAH pair as trade direction by EXMO stock exchange has increased Bitcoin popularity. EXMO has announced the availability of UAH withdrawal and replenishment both via MasterCard/Visa orPrivat24 and AdvCash payment system. UAH transactions with UAH via EX-CODE creation are possible as well.

At the same time Ukrainian users made significant part of EXMO customers even before the aforementioned innovations. The latter has considered to be convenient and transparent stock exchange for cryptocurrencies conversion. Moreover, EXMO has quality API and quick support, which is especially convenient for professional traders.

All the aforementioned factors are considered to be the main indices which will influence Bitcoin price in 2017. While, it is worth taking into account other moments which we will review in our next article.

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