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Factors influencing Bitcoin exchange rate: part 2

12/05/2017 00:00
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In  previous article we have reviewed three the most significant factors influencing Bitcoin exchange rate at cryptocurrency market. But believe us that the moments we will  mention  below should be taken  into account as well by cryptocurrency  investors, as such moments contribute greatly to the market condition. Even  more in some cases they play crucial part in acceptance of decision about cryptocurrency investment.

Factor 4. In 2017 Bitcoin payment system will  become, more simple, legal and convenient. It will prompt the growth of system users’ amount

In  frames of this article we will start reviewing the factors influencing Bitcoin exchange rate exactly from this point.  As this point is directly  related to the factors we have stipulated  in the first part of this topic. The simplification of BTC operation for small scale users of virtual currency is extremely  important taking into account the fact of their weak technical  knowledges. Moreover greater comfort plays  important part for big level investors as well. as there are a lot of people among them who  didn’t manage to understand fully the aspects of working with cryptocurrency and appropriate software.

In 2017  the SegWit developers promise launching Lightning Network “add-on”,  in  case if miners support their updates. this add-on  will allow the  performance of more cheap “off-chain”  payments in BTC. this will  result at  slight change of BTC operation  principle, which will  be remotely reminding bank card operation  principle.

Currently the  conducting of transactions with small Bitcoin amounts  becomes difficult due to commission fee amounting to 0.00050-0.00070 BTC. For  detailed explanation let’s set rather simple example: in  order to  make a transaction  in the amount of 1 USD, you have to  pay commission fee more  than 50 % from this sum-  i.e.  more than 50 cents. Moreover  even in case of this commission fee payment your transactions will be delayed in case of network overloading or weak  blockchain mining.

“Second level systems” such as Lightning Network are aimed at serious “softening” of inconvenient micro-payment issue and overall weak network loading capacity.

Nowadays the developers have rather lot of other apps which would  have prompt  network operation  improvement.  some  of them  are already  ready to  integration into system.

Plastic cards nominated in Bitcoin will  become more popular and Bitcoin cash dispenser will  appear. Casual users will be able to use them  for BTC exchange into  fiat  money. These actions will  make Bitcoins more available for casual users and will  prompt Bitcoin price growth.

The implementation  of specific state recommendations on the usage of Bitcoin (particularly for large scale companies and cryptocurrency stock -exchanges) will increase this currency legality (till the level of its complete approval by the states).  It  will  become  significant moment both for large scale investors and casual users, who are extremely cautious to any  new financial instruments not duly protected from legal  point of view.

While the increase of state control over sound frames might turn out unpleasant changes for people who are not related to large scale business and who value the option of getting financial freedom and lack of control when  using BTC.

The approval of blockchain perceptiveness at mass level might indirectly prompt the reinforcement  of trust to BTC in 2017. It goes about “blockchain  in general” -  i.e. the technology of  distributed storage and processing of data. Lot of banks attracted  by high stability and reliability of blockchain work over the integration of such technology into processing systems. Lot of American businessmen and some insurance companies trading futures also plan the integration of blockchain into their business operation.

Besides this some countries plan using blockchain for more transparent and perfect state management and plan election organization with the help  of such  technology.

Factor 5. Financial and political instability

As a rule various risks and instability make fiat money less attractive for investors by  making  them pay attention to alternative investment instruments.  firstly it goes about gold and virtual currencies. While such situation is particular in case of global sources of instability and instability in frames  of country.

While large scale investors pay  their attention to Bitcoin investments due to high level of macroeconomic instability,  other middle scale investors are often  driven by the negative  processes in bank sphere and excess state control over capital flows. It is specifically particular due to the state addiction to the increase of economic paternalism and slow paces of economic growth serve the source of low percentages for deposits and  growing pressure for cash flow.

If to access Bitcoin exchange rate changes in 2016 the following factors had been stimulating the growth:

  • yuan devaluation;
  • Brexit in UK;
  • extraction of big notes in Venezuela and India;
  • uncertainty about US president election;
  • inflation in Latin countries and other similar events.

Today there are a lot of grounds to think that year 2017 will have the same amount of negative and dramatic events. These events are the following:

  • withdrawal from EU  of some powerful economies after UK in case if globalization opponents come to power in one of the developed countries;
  • economic  indices worsening and depression of some international currencies and their emitting countries;
  • reinforcement of pressure for cash flow and various limitations;
  • finally international economy shift to the period of economic crisis, by thus hitting the economies of developed such as China.  The problems of Chinese equity market and yuan devaluation last year might become one of the most important factors for Bitcoin price increase.

The  problems Bitcoin  might encounter

The issue of getting consensus about Bitcoin  protocol reform will  be one of the most serious Bitcoin  problems  in 2017. In other case Bitcoin network may  shift to crisis condition or will be disrupted in the worst scenario. But the more evident scenario lies at the fact that update will be completed and difficult period will end.

What other trends and  issues might negatively influence Bitcoin ecosystem and prompt its exchange rate decrease?

  1. Chinese authorities might “make difficult” the life of exchange markets providing coins converting and all cryptocurrency users by  additional check-ins and control. Generally such  situation might occur in  other country as well. but exactly in China significant coins flow and trade correspond to negative tendencies over control increase. In most negative scenario chinese authorities might foresee blocking any  transactions  related to cryptocurrency in “High China firewall”.  It  is sure to  shift finally  international crypto economy centre of gravity from China and decrease the demand from chinese investors. This might  significantly influence BTC exchange rate.
  2. The  probability  of hacking some big Bitcoin stock exchange is not high  but possible. While they have improved security measures in comparison to 2016, when Bitcoin exchange rate dropped down due to Bitfinex stock -exchange hacking. That time the price of cryptocurrency has been decreased to 15% for a little time. At the same time it has caused  the delay at cryptocurrency exchange rate growth within  two months after hacking attack.
  3. The  lesser  is probability of money withdrawal from Bitcoin  due to sharp growth of other perspective currencies such as Altcoin or efforts of “bears” aimed at prolonged decrease  of the most popular cryptocurrency exchange  rate. Of course there are a lot of investors asking to which virtual currency to  invest their savings.  Part of them leave their choice at  Altcoins in hope of their popularity and price growth.ost cases such  hopes don’t become true and turn into losses. Experienced cryptocurrency market participants will agree to the fact that  investments in BTC are less risky in comparison to highly advertized Altcoins.

It is also worth  mentioning that Bitcoin exchange rate high  volatility might be the source of exchange rate fluctuations, caused by speculations. Though volatility factor influences general trend of BTC price growth only indirectly. Industry experts are sure that Bitcoin position stabilization will decrease volatility and increase investors’ trust.

The  probability of the aforementioned factors significant influence is not very  high but it should be taken  into account. Experts hope that  positive tendencies will prevail over negative ones and will  prompt Bitcoin further development.

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