The economics behind the rise and fall of bitcoin price

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When the demand for bitcoin goes up, the price of bitcoin increases. This means, as more people buy bitcoin, it causes the price of bitcoin to escalate. Moreover, when the mining difficulty of bitcoin scales up, it reduces the amount of bitcoins being produced. What this means is that there is going to be a scarcity of bitcoin in circulation. This affects the price of bitcoin. It causes the price to move up. In addition, when there is a regulation by government especially in relation to taxes on the production of bitcoin, it forces the miners to shift the cost to users of bitcoins by releasing a small amount of bitcoin into circulation. They are unable to produce at their highest capacity due to high cost of electricity needed for the generation of bitcoin. The taxes cause the cost of electricity to appreciate. This causes the price of bitcoin to ascend. On the other hand, when the demand for bitcoin goes down, the price of bitcoin falls. What this means is that the number of people buying bitcoin reduces which eventually causes the price of bitcoin to depreciate. Besides, when the mining difficulty of bitcoin go down it increases the amount of bitcoin being generated and therefore the amount of bitcoin in circulation. This forces the price of bitcoin to fall because the supply of bitcoin shoots up. Moreover, when the taxes on electricity needed for the production of bitcoin falls, it causes the production of bitcoin to go up. What this means is that the cost of power for the production of bitcoin goes down therefore allowing the bitcoin miners to purchase more power which translate into the production of more bitcoin.