Bitcoin is the leading face of cryptocurrencies. More than any other such currency, Bitcoin has generated more interest, speculation and controversy. Since its creation, the currency has faced a rather wild ride of price fluctuation, legality and overall use. There is no doubting, however, the currency is here to stay, and it has real value. Like any currency, Bitcoin’s price is affected by many real-world factors. Predictions by the Danish firm Saxo Banks indicate that Bitcoin may be about to experience its greatest price bump yet.

The Supply and Demand of Bitcoin

Unlike regular currencies, which have prices that are heavily regulated by government agencies and banks, the price of Bitcoin fluctuates much more like that of any commodity. The law of supply and demand applies very strongly to Bitcoin. This can be seen by looking at how the price of Bitcoin has changed since its creation.

When Bitcoin was brand new and generally unknown, the price of coins was very low due to basically nonexistent demand. That price soon skyrocketed to reach a high of around $1100 in 2013. Since then the price of Bitcoin has been very unstable, crashing to less than $300 and then jumping back up to around $700.

The supply of Bitcoin increases at a rather steady rate as miners produce about 3,600 bitcoins per day. This means the price is determined much more by buyer-side demands. In general, the more people there are willing to buy Bitcoin the more the price will increase. Buyer demand is more likely to increase based on two primary factors. The first is the overall usefulness of the currency. As more businesses and retailers recognize Bitcoin and allow it to be used to purchase products, more buyers will be willing to invest in it. The other determiner is the overall trust consumers have in conventional currencies. Economic uncertainty tends to breed mistrust in the abilities of governments and banks to properly regulate traditional money. Disasters such as those in Greece showed the glaring weaknesses of traditional currency during times of crisis. Bitcoin’s appeal is that its price cannot be directly controlled by a government or banking entity that may be in crisis.

Currently, owners of Bitcoin are primarily individuals and smaller companies willing to risk an investment in such a volatile item. The game may change entirely if very large buyers choose to enter the market. The proposed economic plans of Donald Trump may just be what pushes these big players into the game.

Currency Prices, Foreign Economies and Bitcoin

While Bitcoin is not directly linked to the price of any currency, changes in the prices of fiat currencies may strongly impact the future of Bitcoin. The markets of China and Russia are strongly and directly linked to the United States because these markets traditionally back their currencies on the US dollar. In fact, most of the world backs its currency on the US dollar because the American economy has traditionally be one of the strongest and most stable in the world.

Foreign powers such as Russia and China, however, may not be interested in keeping their currencies and economies so closely tied to the US. China has already taken bold steps to back its money on gold and thus separate it from US currency.

The overall price of the dollar is a strong determiner in this trend. As the price of the dollar increases, foreign currencies lose their value in relation to it. This helps the US, but it hurts the foreign economies. Economic changes under Donald Trump could push the already strong dollar even higher. This would put more incentive on foreign powers to separate from the dollar.

Bitcoin could be one unexpected option. If foreign governments chose to back some of their currency in Bitcoin, the price of Bitcoin would instantly skyrocket due to such a massive surge in demand relative to such a stable supply.

While Saxo Banks admits this is an “outrageous” predication, only time will tell. The history of Bitcoin has certainly been one of unexpected twists and turns, and the biggest of those twists may very well be on the horizon.