Why The Value Of Digital Currencies Rise And Fall

Why The Value Of Digital Currencies Rise And Fall


Hey guys and girls. Welcome back to the Bitcoin series, where
I try to find a way to make a passive income through digital currency mining. My name is Jake Owens, and this is Millionaire
Mindset Hub. In this episode, we take a look at why the
value of digital currencies rise and fall. Alright, let’s get into it. There was a term I used a lot a few episodes
ago which is called “What Is A Current Exchange (And How Does It Work?)” if you haven’t seen
that episode I recommend you pause this video now, go and watch it, the link is in the description
box below, then come back and watch this video. Alright, is everyone back? Great. The term I used a ton in that video was supply
and demand which is the entire reason digital currency prices rise and fall depending on
the supply of the currency and the demand from the market. In this video, I’m going to be using Bitcoin
as the example however these concepts can be applied to any currency, traditional or
cryptocurrency. Essentially, at any one time there is a definitive
amount of coins in the marketplace. Therefore, because it’s not unlimited this creates scarcity
because it’s not possible for everyone to own as many Bitcoins as they want. Due to the scarcity, it creates a competitive
marketplace. Essentially, an auction where you must outfit everyone else in the marketplace
to obtain each Bitcoin that you’d like to buy. Now, to completely understand this, let’s
look at this by using simple mathematics. Let’s say that there were 100 Bitcoins in
the marketplace. And on the first day of opening there were 20 people who wanted to purchase
one Bitcoin each. Because there was an abundance of coins compared
to the demand of people wanting the coins on that first day there was virtually no auction
as there was no need to outbid each other to purchase the currency as there were so
many. So, they all got Bitcoins for $1 each. The second day, 80 Bitcoins and again only
20 people who wanted to buy Bitcoin. So, they each got one Bitcoin for $1 each. The same thing happened on the third, fourth
and fifth day. On the sixth day, one of the people who purchased
Bitcoin realised that he didn’t want it anymore and would rather sell it to purchase something
else. So, on the sixth day he put it on to the market
to sell. And on that same day, 20 people happened to be in the market wanting to purchase one
Bitcoin each. However, unlike the last 100 people, unless 20 are willing to sell their
coins, they all can’t have a Bitcoin on the sixth day because the last 100 people bought
all of the Bitcoins in the market. So, they each have two choices. To come back
another day when more Bitcoins might be available, or outbid the others who want to purchase
the one Bitcoin on offer in the marketplace. And so, the auction begins. Person 1 bids one dollar because he feels
like he shouldn’t have to pay any more than the other 100 people did who were able to
buy Bitcoin before him. But person 2 doesn’t feel the same way, so he bids $1.20 for the
one Bitcoin. Person 3 bids $1.40, all the way up to person 15 who by this time five
people dropped out of the auction before it even began. And the price of Bitcoin now reached
$3.80 and the person who sold the Bitcoin made a $2.80 profit after everyone but one
person dropped out of the auction. Then, on the seventh day the original 19 people
who did receive Bitcoin the previous day and a following 20 people came to the marketplace
looking for Bitcoin. And it just so happens that someone heard about the profit the last
person who sold Bitcoin made so they themselves put their Bitcoin on the market. And on that
day, they made $7 revenue with a $6 profit which was $3.20 higher than yesterdays profit
because the market was higher on this day consisting of 29 people but the supply stayed
the same at 1 Bitcoin. Now, translate that exact same concept millions
of people around the globe who want to purchase a limited supply of Bitcoins. Because there
aren’t enough Bitcoins to go around for everyone who wants one, therefore as the demand continues
to increase and the supply gets smaller and smaller the price will increase as Bitcoin
becomes more and more popular allowing it to reach new heights such as on June 11th
2017 where it hit $3000 per Bitcoin. This is also applied vice versa. Where if
the supply is greater than the demand the price will fall or remain at a low amount
because everyone would get the amount of Bitcoins they want without the need to bid over anyone
else. That is the essence of supply and demand.
When there is supply and little demand prices are low, when there is great demand but little
supply the prices increase. Hey guys and girls. Thanks for watching! 😀 I really hope you enjoyed this video and it
answered all of your questions on why digital currency prices rise and fall. If this video provided you with any value,
and you feel that way inclined please feel free to hit that subscribe button and like
the video. If you have any questions at all or just want
to reach out and say “Hi!” please feel free to do so in the comment section below or just
simply PM me 🙂 Again, thanks a ton for watching! I look forward to seeing you in the next episode. Cheers 🙂

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