At the time Bitcoin was launched, a single Bitcoin cost less than a dollar. By the end of 2017, Bitcoin had reached an astounding A$28,000 in AUD. In the years since then, the price of Bitcoin has fluctuated constantly, making it one of the most exciting investment opportunities for both novice and experienced investors. It is estimated that 1 Bitcoin could hit $100,000 by the end of 2022.
For those who are new to Bitcoin, you may want to find out what Bitcoin is in its simplest form. In simple words, Bitcoin is a virtual currency (cryptocurrency) that acts as payment independent of any individual, group, or organization, eliminating the need for a third party to be involved in payments. It can be purchased on several exchanges and rewarded to blockchain miners for verifying transactions.
What is the significance of the BTC/AUD pair for traders?
Based on market capitalization and cost, Bitcoin has become the world’s top cryptocurrency since its launch in 2009. BTC/AUD has recently become the favorite crypto-to-fiat pair for Australian and international crypto investors and traders.
Though Bitcoin to AUD trading volumes is much lower than Bitcoin to USD, they are increasing at a steady rate. It is the extreme volatility of BTC/AUD that gives it an edge over traditional foreign exchange markets.
A Bitcoin price swing is always an opportunity for traders to profit. The price movement of Bitcoin to AUD can either be long or short, and traders can profit from the price difference depending on the direction in which the price moves.
With that out of the way, let’s take a look at the factors responsible for the Bitcoin price fluctuation in AUD.
Factors That Affect BTC to AUD Price
Analyzing these factors can help you make informed investment decisions.
- Supply and demand
The Australian Dollar has value because it is the fifth most traded fiat currency worldwide, and it’s the official currency of the Australian mainland, Kiribati, Nauru, Tuvalu, and Zimbabwe. People living in the country pay taxes with the Australian dollar, and no laws prevent businesses from refusing to accept payment in AUD.
A cryptocurrency like Bitcoin, also known as ‘people’s currency,’ is quite different from the rest. The currency’s value is primarily determined by the supply and demand between buyers and sellers.
A fundamental factor affecting cryptocurrency is supply and demand. Since Bitcoin was created with a cap of 21 million coins, there is a limit to how many Bitcoins can be created? This has resulted in Bitcoin becoming a scarce commodity, just like gold and silver. As the demand for the product increases over time, the price of the product will also rise as a result. As the demand for Bitcoin shrinks, so will the price of Bitcoin as a result.
The utility of Bitcoin is also one of the key drivers of its demand. In other words, its usefulness must be recognized both by those who hold it and by society at large. With every new use case for Bitcoin, its value grows, making it more desirable. When cryptocurrency is adopted as a primary method of payment, the buyer pool will expand significantly, which will result in a spike in demand.
- Political and economic events
The value of Bitcoin can fluctuate in the same way as traditional currencies do due to political unrest or uncertainty. This effect is amplified by the fact that many investors use Bitcoin to hedge against currency fluctuations.
During the Brexit referendum, when the United Kingdom decided to leave the European Union, Bitcoin’s price increased and the British Pound’s value declined. A similar event occurred in Greece in 2015 when locals purchased Bitcoins as a means of securing their wealth in turbulent economic times.
While currency fluctuations caused by economic or political events will even out over time, the upheaval caused by Global events, such as the COVID-19 Outbreak, can have long-term consequences. The strategy you employ as an investor should take into account both short-term and long-term risk factors.
- Cultural and Media Perspective
Another important factor that investors should consider is how Bitcoin is perceived in popular culture.
An analysis of Bitcoin’s price reveals that positive media coverage stimulates investment in the currency. News coverage that is positive over a long period of time builds confidence in people. However, the downside is that prolonged negative coverage can diminish its value.
If you look at the price of Bitcoin over time, you can see these trends. As mainstream media began focusing on cryptocurrencies, Bitcoin witnessed various price spikes and price collapses.
It is partly for this reason cryptocurrency is considered to be so volatile. The media generates hype and quickly follows up with stories that make investors cautious. Media effects are hard to mitigate, but keeping track of mainstream opinion will help you make wise investment decisions.
However, its volatility is one of the main reasons many people invest in crypto in the first place. If you play your cards right, spikes and increases offer huge profit opportunities. All you need is to do your homework.
- Regulatory bodies
Bitcoin posed a challenge for the regulator in its initial days. Because the currency was decentralized, states had a hard time determining how to intervene.
For the past few years, regulators have been playing catch-up. It is critical for each country to develop its own national approach to cryptocurrency, which could have profound implications for Bitcoin price AUD and the global economy as a whole.
However, there is little chance that regulators will adopt a unified approach, so Bitcoin prices are likely to remain volatile. The closure of Bitcoin exchanges in China and the one-to-one trading of Bitcoin have already led to a temporary decline in Bitcoin’s value. Alternatively, Japan confirmed Bitcoin as a legal payment method in 2014, resulting in a 19% rise in Bitcoin’s value.
- The Bitcoin community
Bitcoin is a social network for making and managing transactions. Developers created the software, and ‘miners’ run the software. Collectively, they verify Bitcoin transactions on behalf of the global community.
It’s important to note that Bitcoin (BTC) may be decentralized, but this community has to make decisions about how to transact, exchange, and adopt it over time. In addition to affecting price, these decisions also affect supply and demand.
Currently, the community decides on any changes by majority vote. Changing the software that mines and authenticates transactions requires approval from more than 50% of the total mining network. When they reach a majority, they can implement the new action.
Bitcoin price AUD is determined by a number of factors. Public opinion about cryptocurrencies, global regulation, and political uncertainty all contribute to external factors. A number of internal factors, including strategic decisions made by Bitcoin miners, will also play a role. Ultimately, Bitcoin’s direction will be determined by participants in its ecosystem.
When these factors are combined, the Bitcoin Price AUD is more volatile than traditional currencies. But it’s more attractive that way as you get to experience the thrill of investing, make more money, and have fun doing it!