What Is Bitcoin, How Does It Work And What Affects Its Price?


Bitcoins are now the talk of the town. This buzzword has been trending in the market since years. At every nook and corner of the world, people desperately want to earn the bitcoins, which are the best examples of advanced technology in terms of blockchains.  On the other part, Japan considers the bitcoins as the legal tender, while JP Morgan Chase CEO James Dimon considers it as little more than a “scam”.

The investors of bitcoins are highly facing chaotic situations after the matter of Shanghai-based BTC China, where there were major Chinese bitcoin exchanges, which were reported on Thursday. Bitcoins are offering efficient means to transfer the money over the internet without using any intermediate and is highly controlled by the decentralized network.

These are authentic in nature and have reliable options to observe the process in which the data are transferred from one port to other. There are certain transparent rules which are thus presenting an alternative way to the central bank to control fiat money. Bitcoin derives both the value from its use as a medium of exchange as well as a store of value.

Bitcoin Exchange

This would lead to stopping of the trading in the field of cryptocurrency from the September 30, which have cited the tightening regulation, while there were smaller bitcoin exchanges ViaBTC, Yunbi, and YoBTC on the Friday announcements that are similar to the closures. This is a kind of negative signal towards the development of the bitcoin in the country.

Also Read: Growth of Cryptocurrency Market

The Indian government is also not satisfied with the bitcoin, which is considered as a threat to the development of this new digital coin. As per the reports of Reserve bank of India official Sudarshan Sen on September 13, the central bank is not feeling comfortable with the “non-flat” cryptocurrency such as the bitcoin.

The digital currency market has been plunged over 50 percent in the last 13 days of trading. You might be thinking that what is the meaning of the bitcoins and why it is so much important for the present scenario? Isn’t it?

Well, bitcoins are the cryptocurrency or else regarded as the digital coins, which are using the rules of cryptocurrency for generation of units and regulation of currency. Bitcoins are generally falling under the scope of the cryptocurrency and considered as the first and most valuable among others in the marketplace. It is mainly defined as the decentralized digital currency which has a great future in terms of economics, development, and invention.

bitcoin chart

But the interest in the bitcoin has recently seen a major drop of more than 50 percent where the growth rate falls from $20,000 to under $8,000. This has lead to increase the curiosity of the developers as they have been struggling hard since years to make to develop the bitcoins and to put the world in a different frame.

Somehow this was going smoothly without any confusions, but the recent downfall in the market has made every shocked. Still, the developers are searching for better options to renew the process as well as to speculate some relevant ways into the system for the surge of trading and taking the digital cryptocurrency market to zenith levels.

Bitcoins are also considered as the first banking currency of the internet that has been existing for years and many people have already questioned about it that what the importance of it and how it works. Many are still in dark and didn’t know where did it come from and what are the ways to get it? Here is some basic definition regarding your doubts which may clear your instincts regarding the bitcoins and its necessity.

Details on price drop of bitcoins

The price of the bitcoin has been dropped to a great extent, and this has made everyone stunned. The price has dropped to around A$8,000 in the last few days after hitting the target of A$10,000 in the past month. In the year 2015, the percentage has raised to a great extent and suddenly, the market faced the major consequences of it rising over 1,850%. All of this information shows how volatile that currency is and what kind of power it holds with it. The question might be striking your mind that what leads to such huge movements? Isn’t it?

Bitcoin Price down

As per the research report, there are four factors which are affecting the price rate of the bitcoins. This involves the political uncertainty and risks, media hype and uptake by peers, moves due to the regulators and government, as well as due to the governance of bitcoin itself.

Also Read: Effect of Cryptocurrency

According to the sources, the last option is likely to be the major factor for the recent downfall in the price and failed to support the developers towards the end of the week. The split of the bitcoins would have doubled the transaction speed and might have increased the number of coins in the circulations.

How does bitcoin work?

Bitcoins are regarded as the completely virtual coins that are designed to be self-contained for their value without including the functions of the banks to save and store money. Once you have bitcoins with you, then they behave in a similar manner like the physical coins; they possess trade and value just as if they were clumps in your pockets.

You can easily use the bitcoins to buy the goods and services online, and you can tuck them away and will wait in the hope to increase the value over the years. Bitcoins are always traded from one personal “wallet” to another. A wallet is kind of small personal database that you can easily store on the drive of the computer that is commonly known as the cold storage.


If you want to store it on the smartphones, laptops, or tablets, then you can even do it, which is known as the hot storage. It is, therefore, an intensive approach to create the bitcoin as it has numerous advantages and facilities to manipulate the system.

What are the factors that drive the bitcoin?

Political risk

The value of the bitcoin highly depends on the political factors. There are certain political risks which are associated with it as people use it to hedge against the price movements in a specific currency. And sometimes people want to quickly move the huge amounts of value out a currency or country. As per the economic crisis reported in Greece in 2015, there was an increase in the buying of the bitcoins where the citizens were wishing to protect their wealth.

This didn’t seem to affect the bitcoin’s price at the global markets, however, the value remained steady between the A$300 and A$400 for almost a year. But, there was nervousness about the national referendum for Britain to leave the European Union on the date of 23rd June 2016. This date has some major secrets such as there was an increase in the price of the bitcoin, whereas, simultaneously, a decrease in the value of the British pound.

The pound began to change by May 20, 2016. By the end of the month of July, the value was more than 10% below the pre-Brexit value. And at the same time, the price of the bitcoin was increased by 65%. During the election time of the Donald Trump prior followed by two months of a steep rise in the price of the bitcoin. Due to this, there were uncertainties in the growth and that highly affects the US economy.

factor of bitcoin


As the bitcoins are the decentralized currency, so there are certain decision to make that will evolve from time to time. These decisions have a huge impact on the price of the bitcoins. Apart from this, the software which is used to verify the transaction of the bitcoin is created by the skilled developers which are managed and run by the miners.

Miners are the global network people who are supposed to verify the bitcoin transactions well in time. To change the software that is used by the miners, the developers need authentication of the transaction and more than 50% of the global network of the miners to agree with the change. If they are getting the network, then they can create the “fork”.

There were some uncertainties before the fork, but, on August 1, 2017, a new cryptocurrency was invented known as the bitcoin cash. This software can process 30 transactions per second, which is a tremendous work by the developers. Several attempts were made to make the fork, and the third fork failed to get the support in the last week.

Regulatory moves

This defines the ways in which the bitcoins should be treated in terms of the tax systems, or what and whether regulations are applied to it for use. There are two decisions which are highlighted on the price of the bitcoin. The first one is the announcement of the bitcoins, where it was considered as the legal tender in Japan that pushed the price up to 2% within 24 hours. The second decision was the China’s decisions that shut down several bitcoin exchanges as well as have banned the initial coin offerings, which affects the bitcoin price by 29% in just 24 hours.



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