 What determines Bitcoin’s price? 
2024-11-23

 Bitcoin’s value debate: Beyond skepticism 
While critics like Warren Buffett argue Bitcoin lacks intrinsic value, its growing role as a regulated asset suggests deeper complexities.
Billionaire investor Warren Buffett famously called Bitcoin “probably rat poison squared,” arguing that it “produces nothing” and has “no intrinsic value.” 
After all, unlike traditional assets such as gold, which can be used for jewelry or electronics, or oil, which powers industries and vehicles, Bitcoin BTCUSD has no physical form or tangible use.
This lack of tangibility leads many to believe that Bitcoin’s value is based purely on mutual agreement — a consensus among investors willing to buy and hold it. Such a view often fuels skepticism, with critics claiming Bitcoin is nothing more than a Ponzi scheme, where its price is tied to convincing new buyers. In this scenario, if belief in Bitcoin falters, its value could eventually collapse.
However, the truth is more complex. As Bitcoin matures into a regulated asset and, in some cases, even a legal tender, its price is influenced by a range of factors.
 What makes Bitcoin valuable (really): Supply and demand 
Bitcoin’s fixed supply is what first makes it unique. Only 21 million BTC will ever exist, and by November 2024, over 19.5 million had been mined. This built-in scarcity is why many consider Bitcoin “digital gold,” as prices go up when demand grows but supply stays limited. It’s basic economics: Less supply plus more demand equals higher value.
In addition, one must consider the Bitcoin halvings, which tighten supply. The April 2024 halving, for example, cut mining rewards from 6.25 BTC to 3.125 BTC per block. These halvings occur every four years and limit how much new Bitcoin enters circulation. Past halvings triggered major price spikes, such as in 2020, when Bitcoin soared from $9,000 pre-halving to over $60,000 a year later. 
However, in 2024, the effect was more gradual, with Bitcoin’s price climbing from around $45,000 in the winter lead-up to around $70,000 in May and $99,486.10 as of late November. The reduced supply pipeline is still tightening the market, with analysts expecting a delayed upward impact.

Indeed, demand isn’t just technical — it’s real-world. Several big players, including BlackRock, launched spot Bitcoin exchange-traded funds (ETFs) in 2024, pulling in institutional money and mainstreaming Bitcoin further. 
Retail investors, using platforms like PayPal and Robinhood, also step up during bull markets, especially when FOMO returns during price rallies. Meanwhile, traders amplify short-term moves with speculative bets, feeding Bitcoin’s famous volatility.
Bitcoin’s limited supply and growing demand — driven by institutions, retail users and halvings — keep supply and demand at the heart of its price dynamics.
Did you know? Unlike traditional financial systems, Bitcoin trading primarily occurs via a network of various exchanges and entities, including decentralized peer-to-peer platforms, rather than through a single centralized entity. This means that no single entity can manipulate withdrawals or halt transactions, making Bitcoin, to some extent, resilient against panic-driven sell-offs
 The impacts of market sentiment on Bitcoin’s price dynamics 
Bitcoin’s price is, naturally, often a reflection of market sentiment. Positive sentiment can send it soaring, while negative news can trigger steep declines. Unlike traditional markets, where valuations are tied closely to fundamentals, Bitcoin’s value is highly sensitive to perception and emotion.
When institutional players step in, confidence grows. For example, BlackRock filed for a Bitcoin ETF in June 2023. Even though it wouldn’t be approved until January 2024, the announcement alone led to a price surge, with Bitcoin rallying over 20% in a few days. Similarly, when companies like PayPal or Square announce crypto integrations, it reinforces Bitcoin’s legitimacy, boosting demand and price.
Conversely, negative sentiment can have an equally dramatic impact, such as when news breaks of regulatory crackdowns. China’s 2021 mining ban led to Bitcoin losing nearly 50% of its value in just a few months. 
Hacks and security breaches also shake confidence. After the Mt. Gox hack in 2014, where 850,000 BTC was stolen, Bitcoin’s price plummeted and took years to recover.
Public perception amplifies these effects. FOMO — (fear of missing out) often drives bullish runs, while FUD (fear, uncertainty and doubt) leads to panic selling during downturns. Social media, online forums like Reddit, and influencer posts add fuel to these emotional cycles, creating a feedback loop that can rapidly escalate price movements.
So, you can’t ignore that Bitcoin’s price relies on market sentiment, with prices swinging wildly based on how the market feels at any given moment. However, it isn’t the only determinant of price.
 Bitcoin’s macroeconomic role: Hedge, safe haven and market reflection 
Bitcoin’s price often reacts to broader economic trends, acting as both a hedge and a speculative asset.
During periods of instability, like the ongoing financial crises in countries such as Turkey and Argentina, Bitcoin’s decentralized nature offers a lifeline. For example, in Argentina, where annual inflation had soared to 193% in October 2024, Bitcoin has become a trusted way to store value as the local currency lost its purchasing power.

Similarly, geopolitical tensions have highlighted Bitcoin’s role as a financial safe haven. During the Russia-Ukraine conflict, Bitcoin has allowed individuals to transfer wealth across borders despite sanctions and financial restrictions.
However, Bitcoin doesn’t always act independently of traditional markets. After the 2024 United States presidential election, Bitcoin surged alongside the S&P 500 as the markets reacted to the stability brought by the end of the election cycle and crypto investors celebrated Donald Trump’s promised crypto-friendly policies. 
This parallel movement shows how Bitcoin’s price can reflect macroeconomic sentiment, moving in step with broader financial markets when conditions align. No doubt, its ability to adapt to diverse economic scenarios keeps it at the center of the global financial conversation.
 How global regulations shape Bitcoin’s price 
Regulation also plays a key role in Bitcoin’s price by shaping investor trust and influencing market behavior. In 2024, regulatory developments have had a significant impact, reflecting different approaches in key regions.
In the United States, Trump’s reelection to the White House brought a wave of optimism for the crypto industry. He pledged to position the US as the “crypto capital of the planet” and even floated the idea of creating a national Bitcoin reserve. This pro-crypto stance has driven institutional and retail interest, helping Bitcoin hit new all-time highs in 2024. 
Across the Atlantic, the European Union has taken a more cautious stance. The rollout of the Markets in Crypto-Assets (MiCA) regulation aims to regulate digital assets comprehensively, focusing on consumer protection and market stability. 
While MiCA’s clarity is a step forward, its strict rules on compliance and reporting have made operating in the EU more challenging for crypto businesses. Several startups have either slowed their expansion or shifted focus to less regulated regions, tempering Bitcoin’s momentum in European markets.

Elsewhere, Asia is navigating its own regulatory path, with places like Hong Kong embracing crypto-friendly frameworks, while others, like India, remain skeptical and unclear on their policies.
With time, regulation can provide a sense of authenticity and legitimacy within the broader financial system, potentially elevating digital assets like Bitcoin to the status of legal tender, such as was seen in El Salvador in 2021. This helps bridge the gap between traditional and decentralized finance. 
Furthermore, as central bank digital currencies (CBDCs) gain relevance, regulation may play a crucial role in stabilizing price fluctuations by fostering trust and standardization across the market.
Did you know? As of 2024, over 130 countries, representing more than 98% of global GDP, are exploring CBDCs. Among these, 11 countries fully launched CBDCs, while many others are in various stages of development or pilot programs.
 Bitcoin’s price surge driven by growing institutional and retail adoption 
Bitcoin’s price is closely tied to how widely it’s adopted, both by institutions and individuals. As adoption grows, so does its utility and demand, driving prices higher.
Institutional adoption has been a game-changer for Bitcoin. Companies like MicroStrategy, which holds over 330,000 BTC as of November 2024, use Bitcoin as a reserve asset, citing it as a hedge against inflation. 
Retail use is another crucial driver. Bitcoin is increasingly used for everyday payments and cross-border remittances. For example, many remittance services in Latin America have embraced Bitcoin to reduce fees and transaction times. In 2024, PayPal expanded its Bitcoin payment feature globally, making it easier for consumers to use Bitcoin for purchases, which boosts transaction volume and adoption.
Technological growth has also expanded Bitcoin’s usability. The Lightning Network, a layer-2 solution, allows for faster, cheaper transactions, making Bitcoin more practical for micropayments and everyday use. In 2024, major players like Square and Strike continued to support Lightning integration, improving Bitcoin’s scalability and appeal. These advancements lower barriers for businesses and consumers, driving broader adoption.
Adoption at all levels strengthens the network, increasing its value and Bitcoin’s long-term price potential.
Did you know? Global cryptocurrency ownership surged to over 560 million people in 2024, a 34% increase from the previous year.
 Bitcoin’s price: More than speculation? 
Bitcoin’s price is influenced by a range of factors, from supply dynamics to adoption and macroeconomic trends, challenging the notion that it’s merely speculative.
Bitcoin’s price isn’t as simple as Buffett makes it out to be. While many like him argue it’s nothing more than a speculative bubble, the reality is shaped by a mix of factors. 
From its limited supply and halving cycles to institutional adoption and macroeconomic trends, Bitcoin’s value is supported by multiple factors.
As it gains traction as a regulated asset and even legal tender in some cases, Bitcoin’s price is increasingly tied to real-world demand, innovation and its role in a digital-first financial system. 
It’s very well more than just speculation!