The Real Reason Bitcoin Is Skyrocketing

The price of Bitcoin just just rocketed past $2000, yet the truth is, the price of one bitcoin is the least interesting thing about it.

Most people are amazed that the price of Bitcoin has gone from $200 to $2200 in just 24 months. No asset class in the world has performed better, and it seems that there is nothing stopping this bull run from reaching even greater heights. Stories of people finding bitcoin in their computers that are now worth millions of dollars are going to start popping up in the news once again, and the media cannot get enough of it. And of course, it makes sense for this to be over hyped because 1000% growth in 24 months is not “normal”.



The thing is, people also want to know WHY bitcoin’s value keeps rising. Why is it worth $2200 for one bitcoin today? What gives it this valuation?

Whatever explanations you hear from so-called experts, don’t believe them. There is only one reason for the price of Bitcoin, or the price of anything else for that matter, to go up or down.

The Law of Supply and Demand

The law of supply and demand. Free market forces dictate that when there is more demand than there is supply, prices will rise. That’s it. There is nothing too complicated about it. The reason why Bitcoin’s price keeps rising is that there are more people buying bitcoins than there are people selling bitcoins, and because Bitcoin is capped at 21 million units.

This brings us to the real question we should be asking: Why are more people buying bitcoin today?

Utility + Scarcity = Value

Japan, one of the most advanced countries in terms of technology and also one of the biggest economies in the world, just made Bitcoin a legal payment method nationwide. Suddenly, Bitcoin became useful in Japan for merchants and consumers alike. This drove the demand for Bitcoin up, and since it is a very scarce asset, it naturally also drove the price up. It actually increased by over 100% since then. They are the first country to do this, with the Philippines following suit with circular no.944 of the BSP taking effect just a few months ago. Expect more countries to follow too.

A Hedge Against Financial Crises

Bitcoin, as mentioned by CNBC, has become a safe haven asset for investors, much like gold or other commodities that go against the flow of capital. Simply put, when the economies of the world are tanking, Bitcoin price tends to go up. Savvy investors are starting to learn that taking a small percentage of your savings or investments and placing them into Bitcoin will offset most losses and actually give much bigger gains, as proven historically. This means that more people want to buy Bitcoin, which translates to a higher price.

Speculation

The world of Finance is like one big casino. A lot of people get into forex currencies or the stock market for one reason alone - to make money. There are a lot of risks if you do not know what you are doing, and you could easily go broke. Bitcoin, being a very volatile asset class where the price fluctuates up and down, is seen by a lot of traders as a risky but exciting way to earn money. Historically, anyone who has ever bought Bitcoins at any given time in the last 8 years has made money. Since people want to trade Bitcoins daily, it only means that… more people are buying it on a daily basis.

Bitcoin Has Become A Global Reserve Cryptocurrency



Altcoins, or other cryptocurrencies, are also on the rise. There is a gold rush across the whole industry, and Bitcoin is the way to get in. Most Altcoins cannot be directly traded into regular currencies and need Bitcoin to be able to buy in or cash out. So all these people that want to trade cryptocurrencies are buying Bitcoins to fund their trading. This drives the demand for Bitcoin up and up and up, hence the price follows.

Here’s a fun fact: People who bought $100 worth of Bitcoin in 2010 and kept it all these years will be sitting on $72.9 Million today.

So, what is the real value of one Bitcoin? This can only be determined by the free market, and no one else. What gives it value? It’s utility and scarcity, or demand for its different use-cases outpacing its global supply.

The truth is, the price of Bitcoin is actually the least interesting thing about it. There is an underlying technology behind Bitcoin called The Blockchain that has captured the imagination of thousands of the smartest and most entrepreneurial minds in the world. It has created a multi-billion dollar industry that is now working together in building applications and services that will bring the benefits of Bitcoin and Blockchain technology into mainstream acceptance.