Why Bitcoin so expensive ?
Why Is Bitcoin So Valuable?
The demand for bitcoin is increasing, whereas the availability of new supply is shrinking, with the size of each block reduced by half, on average, every four years and the final bitcoin to be mined somewhere around the year 2140. Indeed, unlike most other produced goods, the rate of supply of new bitcoins cannot increase in response to spikes in demand.
A supply and demand imbalance results in increased prices. Some consumers, companies, and investors favor bitcoin for this and the potential ability to hedge inflation. The resulting popularity contributes to increased demand, and thus an increased price.
What Makes Bitcoin Prices Go Up and Down?
Bitcoin's price fluctuates for various reasons, including media coverage, speculation, and availability. With negative press, some bitcoin owners panic and sell their shares, driving down the price. Vice versa with positive press. Also, when the volume of bitcoin sold on the market increases, the price decreases. As more institutions adopt bitcoin as an investment and medium of exchange, its price increases.
Also, many people have eroded confidence in their fiat currency and seek alternative sources to store their money. Because bitcoin is decentralized and unregulated, it is a favorable alternative, thus driving up its price.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does not own bitcoin.