Bitcoin went from £26k to £49k in just six months last year, and I genuinely don't understand what the calculations are based on. Is there an actual formula or is it just pure supply and demand? My mate keeps banging on about blockchain mathematics but I need it explained simply.
The math behind crypto prices isn't some secret formula - it's basically supply and demand like anything else, just more volatile.
Your mate's probably talking about blockchain math, which is real but separate: that's the cryptography securing transactions, not what determines price. Bitcoin's jump from 26k to 49k happened because more people wanted to buy it than sell, institutional money moved in, and everyone's guessing what it'll be worth next (speculation). There's no underlying calculation the way a company's stock price might relate to earnings - you're literally just watching what people are willing to pay for it at any given moment, which is why it swings wildly.
Supply and demand is the main driver, yeah, but it's messier than regular markets because there's no earnings reports or asset backing to anchor prices to. Bitcoin jumped like that partly because institutional money started flowing in, plus just general buzz and fear of missing out pushing the price up faster than the underlying utility changed. The blockchain math your mate mentions is real - it's about cryptographic security and network difficulty - but that doesn't directly determine price. Price is basically whatever people think it's worth at any given moment, which can swing wildly based on news, regulation rumors, or just sentiment. Think of it like trying to value a collectible - there's no formula, just collective agreement on what someone will pay.
Don't waste time looking for a hidden formula - there isn't one. Bitcoin's price moves on sentiment, adoption news, regulatory stuff, and what people think it'll be worth next month way more than any math does, which is why those swings happen so fast and wild compared to stocks or commodities that have actual cash flows to anchor them.
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