We need to understand that the price of Bitcoin is a balance between what price someone is willing to trade with to part from the Bitcoin and what someone is ready to pay to acquire it. In a simpler scenario between two people, where I’m trying to buy a house from, say Mark. I’d be looking to buy the house at the cheapest price that I can get and Mark would be looking to sell the house at the highest price that he could get. Of Course, this transaction cannot happen if both of us stand our ground and refuse to come to an agreement. Say, this transaction is similar to majority of the transactions where I can afford to buy the house for a certain sum and no more than that, and Mark certainly does have a figure in mind below which he wouldn’t be willing to sell his house.

These are called upper and lower limits of what could be the value of the house in question. Once we have a clear picture of our upper and lower limits for this transaction, we can much easily decide on a price for the house that’s between our upper and lower limits of what we’re pricing the house at. This is an example of how a transaction takes place between two people that come together to trade a house in exchange for a certain sum of money.  Bitcoin exchanges and companies that transact using bitcoins determine a lower and a upper limit around what a person in possession of Bitcoin is willing to sell it for and what a person is willing to pay in order to acquire it. A price is finally determined after setting upper and lower limits between a seller and a buyer. A price is determined between the limits based on a pricing strategy that the company(exchange) employs.  This pricing strategy differs from company to company and could also manipulated if desired. A company’s pricing strategy is dependant on its internal policies and long term plans.