To understand how the price of Bitcoin can change so rapidly, it is important to understand the dynamics of pricing.  Consider this chart from Bitstamp which shows a range of bars, as well as a trending line for the “asks” and “bids.”

chartsThe current price point is illustrated by the intersection of the Green and Red line, which in this chart is approximately $211 USD.  People can scroll along the interactive chart from Bitstamp to not only see the price, but also the volume.  This helps larger investors and analysts get an idea for the behaviour on the market.  In this chart, the details are provided if you scroll and hover with your mouse as I did in this screenshot, and we can see that approximately 5,000 coins are up for grabs from the $211-$230 price range.

 

So what?

Well, you may not be interested in this chart at the moment, but it tells you a couple important things about how pricing can change.  First, the number of Bitcoins on the market (whether large or small) can provide good insight to how a market may move.  In cases where there are over 200,000 coins moved per day (like most of last week), one can then gauge how long it will take for the various price points to be reached.  If someone suddenly bought up all the open orders (approx. 5000 coins), the price would dramatically increase.

 

We can see these price fluctuations appear during buy-in and selloff phases, where the demand can either outpace the volume or stagnate.  To date, the concern about stagnation has been a non-issue, especially given the opportunity to trade BTC between all the various Altcoins.

 

What’s The Takeaway?

If you remember anything about this chart, remember to understand that the people who are “asking” a certain amount for their coins, whether it be $200, $2000, or $20000, is only a figurative price until they actually receive a payment for it.  So how does a climbing price affect the change?   If the people who are selling their coins for $200 suddenly realize they could get $500 for a coin, they may reduce their selling, thus limiting the amount of coins on the market.  So suddenly, the price of buying 5000 coins for a Million could cost a lot more if people asked for greater values.

What’s A Good Price To Buy?

Historically, the current price is lower than the previous averages, making today’s market a Buyer’s market.  The thing to remember here is that the market makes the rules on pricing so if you decide to buy or sell at a certain price point, you may not always be guaranteed that price point in the future, hence the importance of using caution and calculations when speculating on the Market.  To learn more about investing, a digital bitcoin exchange, and other general investing, register in the Seventh Continent today. 

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