To answer your question, and explain the rationale well, I’m going to dig into details.

Bitcoin was created in 2009, and the first transaction was 10,000BTC for two pizzas. People bought and sold Bitcoins for under a dollar at the time.

In 2011, Bitcoins were priced at 5 dollars. At the end of 2013, BTC hit the price over 1,100 US dollars. That’s a huge increase in demand over time. As the demand grew, the price followed.

It’s logical – if many people want something, some of them will be willing to pay more to get it. And when the sellers realize they can sell their coins for more money, new, higher prices are set.

Bitcoin network is supported by so-called miners, which offer their computing power to keep the network running. Transactions are stored into blocks. After the miners create each block, they are rewarded with Bitcoins by the network.

The Bitcoin code dictates that 21 million coins will be produced over the course of cryptocurrency’s lifecycle. The reward for miners was initially 50BTC. In late 2012 the reward was halved to 25BTC. In 2016 the halving happened again – the reward is currently 12.5BTC. Next halving will occur in 2020.

As the reward gets smaller, the miners need Bitcoin prices to grow in order to cover the expenses such as electrical power and equipment.If the price remains at the same level after halving, mining becomes unprofitable.

So, now we have two variables:

1. Higher demand (as Bitcoin adoption rates grow every year)

2. Lower supply (as miners go out of business due to unprofitability)

Simple law of the market applies:

When everyone wants something that only a few have – the price goes up.

Considering the high adoption rate and an exponential growth in the number of Bitcoin transactions in combination with lower mining rewards, lost coins, and other factors that lower supply many cryptocurrency enthusiasts believe that the price will drastically grow. The 10,000 US dollars mark is often mentioned as it seems realistic considering the growth tendency of the cryptocurrency.

References:

History of bitcoin – Wikipedia
Bitcoin Block Reward Halving Countdown
The Path To $10,000 Bitcoin


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Posted by Min Park

Blockchain Marketing Specialist / ICON ($42M) / MediBloc ($25M) / BOScoin ($12M) / PAXchain ($60M) / Krown Media / :0

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