Finding a Price: Why is Bitcoin Worth What it is?


Bitcoin price, as any investor knows, can move in the blink of an eye. It can go from $20,000 to the half of it in a few weeks, and Bitcoin is on a constant rollercoaster of price discovery.

This leaves many asking what determines the price of this digital currency, especially for an intangible asset that exists only on the Internet. The cryptomarket, and the Bitcoin one, in particular, is a trading hive, and as such, it is this buzz of traders who ultimately move Bitcoin price up or down. Nothing new, frankly, but it is interesting to note that, as a decentralized asset, it truly is all up to the people to determine the price.

Discovering that price
With Bitcoin being traded back and forth all the time on crypto exchanges, the price is in a constant state of flux that these exchanges are currently trying to put their finger on.

An exchange engages with its users as a brokerage and thus, when one buys on an exchange, the individual is reaching an agreement with the exchange, and it is usually agreed upon in reference to the last trade that was made - this leads to price discovery.

Adam White, the general manager of GDAX, says:

“When people say, ‘What’s the price of Bitcoin trading? Or the price of Ether?’ It’s not any company that sets it. That price is discovered on open exchanges through individuals and institutions trading with one other.”



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