The cryptocurrency market capitalization recently passed the $1 trillion mark and, Bitcoin is responsible for most of that growth. Bitcoin has maintained an upward trend for quite some time, accounting for about 69% of the total crypto market value. That has got so many people wondering what makes bitcoin prices grow at such a faster rate? Well, here are the main elements that drive Bitcoin price.
Bitcoin Halving
Similar to other cryptocurrencies, Bitcoin has a limited supply, and halving is one reason why that happens. Bitcoin halving occurs every four years to ensure the scarcity of new bitcoins.
The network releases new bitcoins into the market through a process known as Bitcoin mining. Miners solve complex math puzzles to mint new bitcoins.
Bitcoin miners currently receive 6.25 BTC per block but, the reward reduces by half every four years. The reduction of Bitcoin rewards by 50% every four years is called Bitcoin halving. The process doubles the stock-flow ratio (total currency available: real money in circulation), making Bitcoin very scarce. The decreasing rewards ensure less market circulation due to Bitcoin’s supply cap of 21 million Bitcoins.
Institutional Adoption
Cryptocurrencies’ prices and value grow or reduce based on public perception. And, institutional adoption is one of the drivers of public perception. Many investment firms, financial institutions, and retail businesses now use Bitcoin as an alternative safe investment asset against market volatility and inflation. The extreme economic swings have convinced many people to hold less cash, driving Bitcoin’s adoption.
Many companies have recently begun converting their cash holdings into Bitcoin reserves, further enhancing Bitcoin’s positive perception. Today, you can trade Bitcoin and other cryptocurrencies on reputable trading platforms such as bitcoin circuit, alongside other lucrative assets like gold and silver.
Digital currency is now easily accessible to the public via multiple online platforms. The confidence of industry leaders and corporate giants has significantly added merit to Bitcoin as a convenient and safe store of value and exchange medium. The positive perception increases Bitcoin’s market demand, thus, driving its price.
Bitcoin’s Decentralization
Like other cryptocurrencies, Bitcoin is a decentralized currency, not subject to any government or authority. That enables people to send and receive payments worldwide at their convenience. However, its decentralized network also ensures low-cost and faster payments processing. And this drives public perception, portraying Bitcoin as a more convenient and valuable exchange medium than other currencies. That inspires Bitcoin’s rapid adoption, increasing its value.
Divisibility
Successful currencies are divisible into several smaller units to facilitate usage as a medium of exchange. Bitcoin has the same quality since it is divisible into smaller units for paying for different goods and services. That ensures greater flexibility in Bitcoin usage within the economy, accurately reflecting every good and service value.
Counterfeitability
A currency must also be challenging to counterfeit to maintain its value in the economy. Bitcoin network has the best security measures to prevent cases of counterfeits or double payments. Bitcoin’s blockchain has a highly encrypted network that maintains an accurate public ledger of all transactions, only accessible to users. The network permanently stores all the verified transactions in blocks, making it difficult for users and third parties to infiltrate the network. The difficulty of counterfeiting Bitcoin is another reason why its price and value keep rising.
The recent meteoric rise in Bitcoin price might make you think it is too late to invest in cryptocurrencies. However, Bitcoin is still in the adoption stage, and experts predict its price will continue to increase over time as it seeks to become a mainstream currency.
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