Most people find it hard to believe that a single Bitcoin has grown to be worth many thousands of dollars, over just a few years’ time. But why is Bitcoin rising in value so much over time?
Why has Bitcoin grown so much?
Bitcoin was programmed to be a deflationary currency, in contrast to traditional money that is reduced in value over time. This is due to its fixed supply, which is set at 21 million coins and its reduction in incentive rewards every 4 years, a process known as halving.
These two factors, in combination with the ever-increasing demand and positive market sentiment, has become a catalyst for the coins’ price growth.
Aside from that, the media has given Bitcoin a fair share of attention, which also plays a major role in the sentiment of the market. Whether positive or negative, the media has brought Bitcoin into the spotlight multiple times, increasing awareness and popularity for cryptocurrency.
Why Bitcoin is rising and dropping in price?
The Bitcoin price changes for a multitude of reasons, all of which alter the demand for the digital currency.
When cryptocurrency receives positive media attention and endorsements from influencers, the willingness to obtain the coin increases, and with it so does its price.
When more people are getting interested in acquiring a Bitcoin, a positive buying momentum drives the price upwards.
The reverse is true as well. When a significant drop in the coin’s price becomes apparent (e.g. when a large amount of BTC is sold in the open market), many people will sell their coins in fear of a larger upcoming drop. When multiplied, this behavior can change the course of the market.
What can we learn from Bitcoin’s trajectory over the years?
- Over a logarithmic scale, and when looking at longer time frames, the price of Bitcoin tends to increase.
- After a massive increase in the coins price, usually in a short 1-2 week timeframe, a bear market is expected to follow. While most investors are dreading negative market conditions, experienced traders utilize this opportunity to multiply their holdings.
- No one can predict the direction of Bitcoin’s price. However, when looking at the coin’s performance over the past decade, there is a large chance that the price will increase, following the halving of 2020.