Investing in some bitcoin? Paying for Bitcoin in Australia has never been easier. Check out our guide on the latest Bitcoin price AUD.
Investing in some bitcoin? Paying for Bitcoin in Australia has never been easier. Check out our guide on the latest Bitcoin price AUD.

What Determines The Bitcoin Price AUD? A Complete Guide

When Bitcoin launched, the price of a single Bitcoin was less than a dollar. By late 2017, the Bitcoin price AUD reached a staggering A$28,000! Since then, the price has continued to fluctuate, making it an exciting investment opportunity for experienced investors and novices alike. As of today (November 2020), 1 Bitcoin is worth more than A$22,000.

In this post, we’re going to explore the factors that determine Bitcoin price in AUD. This way, you can make informed decisions when you invest! New readers should also check out our previous post what is Bitcoin to learn the basics.

Supply and Demand

The Australian Dollar derives its value from being the legal tender issued by the Australian government. People pay taxes with the Australian dollar and businesses cannot legally refuse payments in AUD. Bitcoin, being the ‘people’s currency’, is very different. Its value is predominantly driven by what the supply and demand between buyers and sellers. 

This concept of supply and demand is the most powerful factor affecting the Bitcoin price AUD. The creators of Bitcoin limited its supply to 21 million coins, so there is a cap on how many Bitcoins can enter circulation. This has the effect of making Bitcoin a scarce commodity, like gold and silver. If demand increases over time, the price will rise with it. If that demand shrinks, so will the Bitcoin price.

Utility is another key driver for the demand for Bitcoin. In other words, its usefulness to those holding it and to society as a whole is important. With each new use case, the utility of Bitcoin grows, making it more desirable and therefore increasing its value. For example, once Bitcoin or another cryptocurrency becomes a main method of payment, we expect to see a significant spike in demand as the pool of potential buyers becomes much larger.   

Political and Economic Events

Just like traditional currencies, political upheaval, or uncertainty can cause the value of Bitcoin to change. The fact that many investors use Bitcoin to hedge against price movements in a particular currency compounds this effect.

For example, leading up to the Brexit referendum, where the United Kingdom would decide if it was to leave the European Union, the price of Bitcoin increased and the British Pound declined in value. Similar events happened in Greece, where Bitcoin buying increased as local people sought to protect their wealth from the fallout of the economic crisis in 2015.

Most of the time, currency fluctuations caused by political or economic events will even out in a few months. However, events with a global impact, such as the COVID-19 Outbreak, could have consequences that last for several years. As an investor, you need to factor both short term and long term disturbances into your strategy. 

Media and Culture

The perception of Bitcoin in popular culture is another key consideration for investors.

Analysis of Bitcoin pricing shows that positive media coverage is a major stimulus for investment. People like to read good news and positive coverage over a period of time builds confidence. Of course, the opposite is also true—sustained negative coverage will reduce value.

You can see these trends playing out when you look at Bitcoin’s pricing over time. When the mainstream media started to report on cryptocurrencies, Bitcoin experienced a number of price increases and collapses.

In part, this is why it has a reputation for being so volatile today. The media created cycles of hype and then quickly followed up with stories that made investors wary. It’s hard to mitigate the effects of the media, but keeping track of mainstream opinion will help you to make wise choices as an investor.

One of the reasons many people choose to invest in the first place is that the volatility is exciting to manage. Spikes and increases create huge opportunities for profit if you play your cards right, all you need to do is your homework!

Regulatory Bodies

In the early days, Bitcoin posed a problem for regulators. As a decentralised currency, it became difficult to determine how the states should intervene.

For the past few years, regulators have been playing catch-up. Each country needs to agree on a national approach to cryptocurrency and it could have huge implications for the Bitcoin price AUD and around the world.

It’s unlikely that regulators will adopt an unified approach and as such we can expect further volatility in the Bitcoin market. For example, China has already decided to shut down Bitcoin exchanges and only allow peer-to-peer trading, which resulted in a short-term decline in Bitcoin value. On the flip side, Japan confirmed Bitcoin as a legal payment method, which contributed to a 19% spike in Bitcoin’s value the year the decision was made.  

The Bitcoin Community

The software that makes and manages Bitcoin transactions was created by developers and is run by ‘miners.’ Collectively, they make up the global community responsible for verifying Bitcoin transactions.

Although Bitcoin is decentralised, this community needs to make decisions about how to transact, exchange, and adopt the currency over time. These decisions also have an impact on price.

At present, the community uses a majority votes system to decide on any changes. To make adjustments to the software used to mine and authenticate transactions developers need to get more than 50% of the total mining network to agree with the proposed change. When they reach a majority, they can create what’s known as a ‘fork’ and get to work on the new action.

The Bitcoin Price AUD Will Fluctuate. But You Can Handle It.

A number of factors determine the Bitcoin price AUD. External factors such as political uncertainty, global regulation, and public opinion on cryptocurrencies. Internal factors, such as strategic decisions from Bitcoin miners will also play a role. This is because participants in the Bitcoin ecosystem will ultimately determine which direction the currency is headed.  

Mixed together, these factors mean the Bitcoin Price AUD is more volatile than traditional currencies. At Coinstash, we think that makes investing more exciting, more profitable and dare we say enjoyable! Check out our blog for more on bitcoin prices in AUD.  

About Coinstash

Coinstash is a registered digital currency exchange based in Australia. Our customers praise Coinstash as one of the most user-friendly, educational and supportive platforms. Through its live support 7 days a week, Coinstash has accumulated numerous positive reviews from its customers. Coinstash is also one of the only digital currency trading platforms that has participated in Australian government Austrade’s landing pad program.

Note nothing in this article should constitute general or specific financial advice. Coinstash does not take into account your circumstances when publishing articles. Any content on Coinstash.com.au or related domains are informational only.