In the past few months, before the price of Bitcoin started to spiral down, Bitcoin value went up past the $20,000 mark. That made it the best performing cryptocurrency, closely followed by Ether. Cryptocurrency experts believe that Bitcoin will recover and go back to its all-time high. The question is: why has Bitcoin price rapidly increased over the years? Here are the key reasons why:
Monumental growth of the Bitcoin mining network
Every day, new Bitcoins are introduced into the Bitcoin network through mining activities. The primary fundamental of Bitcoin is that, averagely, a new block of Bitcoin will be mined every 10 minutes regardless of the amount of computer power introduced on the platform. So if more power is introduced on the platform, the algorithm to mine Bitcoin becomes difficult to ensure the 10-minute interval is maintained. In other words, when more computing power is introduced in the Bitcoin network, the cost of mining increases. And because miners are business people, they won’t sell their Bitcoins below their production costs. So the more the Bitcoin network expands, and the mining challenges increase, the production cost will increase, and so will the Bitcoin value.
Demand for Bitcoins by the wealthy Chinese
When it comes to a country with the strictest capital controls in the entire world, China tops the list. These controls prevent the wealthy Chinese from converting the country’s currency (Yuen) into foreign assets. This, essentially, means that it’s hard for the wealthy Chinese people to invest their money outside the country. In fact, the country has been putting measures to devalue the Yuen to stabilize its economy in the wake of plummeting GDP and skyrocketing debt. The wealthy Chinese people have been using Bitcoin to circumvent the strict capital controls and invest outside the country. This has caused the value of Bitcoin to increase over the years.
Because of the popularity and increased awareness of Bitcoin, more people are using the network
The inauguration of Bitcoin occurred in 2009. Before the 2017 boom, it was a niche market, and only computer savvy individuals ventured into it. But in the recent past, that has changed because the number of individual Bitcoin users is growing rapidly. Also, there is a rapid increase in the number of organizations accepting Bitcoins as a form of payment. This is evident from the records that show that the number of Bitcoin transactions has increased threefold.
Although at the end of 2017 Bitcoin value began to plummet, it has now stabilized, and experts project that it will start to increase again. So while the Chinese government began regulating Bitcoin operations, this is a digital currency, which means it’s hard to regulate, and so its price increase is inevitable.
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— Crypto Coin Growth (@cryptocoingrow) 1 de marzo de 2018