Hey guys and girls.
Welcome back to the Bitcoin series, whereI try to find a way to make a passive income through digital currency mining.
My name is Jake Owens, and this is MillionaireMindset Hub.
In this episode, we take a look at why thevalue of digital currencies rise and fall.
Alright, let's get into it.
There was a term I used a lot a few episodesago which is called "What Is A Current Exchange (And How Does It Work?)" if you haven't seenthat episode I recommend you pause this video now, go and watch it, the link is in the descriptionbox below, then come back and watch this video.
Alright, is everyone back? Great.
In this video, I'm going to be using Bitcoinas the example however these concepts can be applied to any currency, traditional orcryptocurrency.
Essentially, at any one time there is a definitiveamount of coins in the marketplace.
Therefore, because it's not unlimited this creates scarcitybecause it's not possible for everyone to own as many Bitcoins as they want.
Due to the scarcity, it creates a competitivemarketplace.
Essentially, an auction where you must outfit everyone else in the marketplaceto obtain each Bitcoin that you'd like to buy.
Now, to completely understand this, let'slook at this by using simple mathematics.
Let's say that there were 100 Bitcoins inthe marketplace.
And on the first day of opening there were 20 people who wanted to purchaseone Bitcoin each.
Because there was an abundance of coins comparedto the demand of people wanting the coins on that first day there was virtually no auctionas there was no need to outbid each other to purchase the currency as there were somany.
So, they all got Bitcoins for $1 each.
The second day, 80 Bitcoins and again only20 people who wanted to buy Bitcoin.
So, they each got one Bitcoin for $1 each.
The same thing happened on the third, fourthand fifth day.
On the sixth day, one of the people who purchasedBitcoin realised that he didn't want it anymore and would rather sell it to purchase somethingelse.
So, on the sixth day he put it on to the marketto sell.
And on that same day, 20 people happened to be in the market wanting to purchase oneBitcoin each.
However, unlike the last 100 people, unless 20 are willing to sell theircoins, they all can't have a Bitcoin on the sixth day because the last 100 people boughtall of the Bitcoins in the market.
So, they each have two choices.
To come backanother day when more Bitcoins might be available, or outbid the others who want to purchasethe one Bitcoin on offer in the marketplace.
And so, the auction begins.
Person 1 bids one dollar because he feelslike he shouldn't have to pay any more than the other 100 people did who were able tobuy Bitcoin before him.
But person 2 doesn't feel the same way, so he bids $1.
20 for theone Bitcoin.
Person 3 bids $1.
40, all the way up to person 15 who by this time fivepeople 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 oneperson dropped out of the auction.
Then, on the seventh day the original 19 peoplewho did receive Bitcoin the previous day and a following 20 people came to the marketplacelooking for Bitcoin.
And it just so happens that someone heard about the profit the lastperson who sold Bitcoin made so they themselves put their Bitcoin on the market.
And on thatday, they made $7 revenue with a $6 profit which was $3.
20 higher than yesterdays profitbecause the market was higher on this day consisting of 29 people but the supply stayedthe same at 1 Bitcoin.
Now, translate that exact same concept millionsof people around the globe who want to purchase a limited supply of Bitcoins.
Because therearen't enough Bitcoins to go around for everyone who wants one, therefore as the demand continuesto increase and the supply gets smaller and smaller the price will increase as Bitcoinbecomes more and more popular allowing it to reach new heights such as on June 11th2017 where it hit $3000 per Bitcoin.
This is also applied vice versa.
Where ifthe supply is greater than the demand the price will fall or remain at a low amountbecause everyone would get the amount of Bitcoins they want without the need to bid over anyoneelse.
That is the essence of supply and demand.
When there is supply and little demand prices are low, when there is great demand but littlesupply the prices increase.
Hey guys and girls.
Thanks for watching! 😀 I really hope you enjoyed this video and itanswered 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 likethe video.
If you have any questions at all or just wantto reach out and say "Hi!" please feel free to do so in the comment section below or justsimply PM me 🙂 Again, thanks a ton for watching! I look forward to seeing you in the next episode.