Why is the Price of Bitcoin Increasing?
In the beginning, Bitcoin had a price of only a couple of cents, but in a span of a year, the price reached $11. Afterward, it was constantly rising in the past decade.
Even with the fluctuations it had, it never went back to the low price it had prior to a bull cycle. Today we see in the news that Bitcoin has surpassed $50,000, which is a huge accomplishment for Bitcoin investors, and this is why lots of people want to obtain Bitcoin. So, if you’re wondering why the price of Bitcoin is rising, keep reading. We cover the essential factors which impact the increasing price of Bitcoin.
The Ratio of Supply and Demand
Firstly, the price of Bitcoin is affected by supply and demand. As this is a decentralized cryptocurrency, there aren’t fiscal or monetary policies that can affect the supply of Bitcoin. As a matter of fact, Satoshi Nakamoto, which developed Bitcoin, has kept the number of BTC at 21 million. The current supply is further restricted by an event called Bitcoin halving, which is programmed in the Bitcoin protocol to happen after 210,000 blocks are minded on the network.
What’s more, the demand for Bitcoin is currently rising, especially with the introduction of institutional investors on the network. And because the supply is rising at a slower pace than the demand, the price is surging.
So, basically, Bitcoin was designed as a deflationary cryptocurrency. When we compare the price of Bitcoin now with a past price point, we can notice that the demand for BTC wasn’t as big as it is today, which is why the price was not rising as quickly as it is increasing right now.
The liquidity of Bitcoin makes it easy for BTC to be traded online on online exchange platforms. This means that in just a couple of minutes, you can easily obtain BTC or exchange it for fiat currencies.
Early on, there were only a couple of online trading sites, so even if you wanted to invest, you didn’t have many choices. Today you can choose between a lot of trading sites; each has special features that make them a good option for certain investors.
For instance, Bitcoin Rush is an exchange platform that uses AI and blockchain technology to create a safe trading environment and increase accuracy in trading. It’s also convenient that the platform is fully optimized for mobile and desktop devices; hence it provides a seamless trading experience for its users. Members can register when they deposit at least $250.
When Bitcoin was first set up, there weren’t any institutional investors, and most supporters were miners on the network who received block rewards for their work. But there were some companies that notice the potential of Bitcoin, and the first institutional investor was Pantera Capital which was specifically set up for cryptocurrencies in 2013.
Today there are actually a lot of trust funds and institutional investors that invest in cryptocurrencies on behalf of huge clients. Some examples include the Grayscale Bitcoin Trust, Osprey Bitcoin Trust, and many others. Moreover, Bitcoin is also very present in the business sector, and a lot of companies are supporting Bitcoin and other cryptocurrencies by accepting crypto payments.
Because this is a decentralized virtual cryptocurrency, the main factors that impact the supply and demand, will always drive the price of Bitcoin. Now, as there is a continual institutional interest in investing in BTC, the demand is far greater than the supply. Hence Bitcoin is considered a rare asset that is a good store of value. Actually, most of the investors are looking to get Bitcoin and to keep it for a longer period of time. This also affects the price of BTC because investors are treating the cryptocurrency as a safe haven asset.