The Impact of Market Movements on Cryptocurrency Values

Ever since its founding by Satoshi Nakamoto in 2009, Bitcoin (BTC) has retained its status as the quintessential cryptocurrency. The name has become synonymous with what cryptocurrency is, but the technology’s relatively recent emergence means that it is important to stay ahead of trends in the market.

The BTC to USD conversion rate, sitting at 1 to $63,622.60 as of September 24, 2024, is traditionally a reliable metric for understanding your investment, ensuring that the decisions you make are informed and successful.

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Decentralization And Immutability: Bitcoin’s Pillars

As with all cryptocurrencies, Bitcoin is decentralized, meaning its value isn’t backed by any one government or entity. Its worth, therefore, lies in the system itself, which offers cryptographic proof instead of a traditional bank’s trust system.

Bitcoin relies on only having 21 million coins in circulation, causing its value to be a publicly agreed upon metric based upon scarcity, similar to gold or silver.

Unlike physical and current digital systems, Bitcoin can be bought, sold, and exchanged directly, eliminating intermediaries like banks.

Using the blockchain, all transactions using Bitcoin exist on a public ledger for anyone who wants to access it; due to this public accountability, transactions are hard to fake and difficult to backtrack on.

Comparing Bitcoin To The Dollar

At launch in 2009, the first recorded exchange was at a rate of 5,050 coins for $5.02. Since then, Bitcoin’s worth has experienced a rapid climb, with highs and lows carrying it to its current valuation of nearly $60,000 for each coin.

With investors speculating on Bitcoin as a defense against inflation and volatility in the market, it remains important to consider just how intertwined Bitcoin is with the United States dollar.

Though having nothing directly to do with the dollar, the most reliable method of tracking the worth of a Bitcoin is by comparing it to the dollar. During a recent market downturn which began on July 29th, Bitcoin fell over 14% in 24 hours amid fears of US recession.

Bitcoin may be an independent currency, but it remains subject to the uncertainties of the global market.

How Bitcoin Works

Beyond tracking the exchange rate, it is important for an investor to understand how Bitcoin works, in order to make it work for them. Bitcoin and most other cryptocurrencies rely on the blockchain to secure their transactions.

Blockchains are sections of data which connect to one another and transmit information, including transactions, who bought and sold, and when a transaction took place.

Decentralization ensures that the blockchain is openly accessible, and not controlled by any single organization. Each block in the chain is open to the public, and anyone with a connection to the chain can contribute.

Any additional updates change each user’s copy of the blockchain, while the wider system maintains safety and security.

Every addition to a cryptocurrency’s blockchain, such as Bitcoin, requires verification by the majority of coin holders, and each wallet receives an encryption pattern with sufficient statistical randomness to ensure no fraudulent transactions take place.

Earn Through Mining

Adding a block to the chain has become a process referred to as Bitcoin mining.

It is a task which has proven difficult for many people, since a significant amount of computing power must be devoted to solving the code patterns necessary to verify a transaction and add a new block to the ever-growing chain.

As a result of the technical and energy demanding process, Bitcoin provides miners about 3.125 BTC for each block they add to the chain, a payout which has halved about every four years.

Despite this, the demands for better mining technology continue to rise, imposing further limits on who can reasonably contribute to mining. Code verification is becoming more challenging, mining is less lucrative, and the energy costs only continue to rise.

Users can still earn off of Bitcoin mining in addition to trading, but the payout is shrinking with time.

Using Crypto In The Market

In terms of raw purchasing power, cryptocurrencies tend to lack real utility. Bitcoin suffers from these issues less than most cryptocurrencies, since businesses which accept crypto will generally allow transactions with Bitcoin over alternatives.

Corporations like PayPal, Whole Foods, and Microsoft accept Bitcoin as currency, but local stores are not likely to do the same. As a result, Bitcoin is more often used as an investment alternative, helping users diversify their portfolios rather than make transactions with.

Additionally, most services which do accept Bitcoin are backed by financial providers which instantly convert BTC to USD when using debit cards linked to a crypto wallet, turning the coin into a source of credit. Of course, this carries tax implications in the U.S.

Again, Bitcoin’s ties to the market through investment make it essential to understand current conversion rates between it and the dollar.

This doesn’t mean that Bitcoin is reliant on the U.S. government, however.

In fact, Bitcoin’s decentralization means people can store value without needing to rely on government backing, making crypto a popular alternative in nations like Zimbabwe, Venezuela, and Argentina, nations which carry large debt and have poorly valued currencies.

Purchasing Bitcoin

Bitcoin is typically bought through cryptocurrency exchanges. Similar to brokerage accounts, users are required to verify their identity and back their crypto account with a finding source such as a debit card or bank account. Due to its decentralized nature, Bitcoin requires specialized storage called a Bitcoin wallet, which can be “hot” or “cold.” Hot wallets, or online wallets, are held in the cloud or in an exchange itself. Cold wallets, or mobile wallets, are offline devices storing Bitcoin without internet connection.

It’s important to note that Bitcoin can often be bought fractionally, so users don’t have to buy whole coins at once. However, common fees on crypto transactions can add up when making small-dollar purchases. Additionally, Bitcoin purchases are not instantaneous, due to the verification process of Bitcoin mining.

Transactions can take anywhere from 10 minutes an entire day to complete.

Remaining Aware Of The Market’s Impact

Cryptocurrencies are speculative and volatile, and while Bitcoin is more stable than others, it is no exception. The recent market downturn is evidence of Bitcoin’s market volatility, but it is important to note that the crypto market is generally on the rise.

Since crypto often behaves like a stock investment, it’s important to handle trades carefully, and to be attentive to changes in the market, especially concerning the rate of exchange between BTC and USD.

Disclaimer: The above references an opinion of the author and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. Invest responsibly and never invest more than you can afford to lose.