The dramatic change in the rate of the first cryptocurrency in 2021 attracted the attention of even people far from digital assets and blockchain. To become a dollar millionaire at the rate of $69 thousand, it was enough to have 15 BTC coins. The rating of the richest investors in the world, owners of crypto-assets, changes every day. At the same time, many people don’t understand why bitcoin is so expensive. Newbies are interested in what contributes to the growth of the price of the asset, which is not secured by anything.
The price of bitcoin depends on how much people are willing to pay for it. But it’s more complicated than that. Many factors influence the price of bitcoin, including the growing difficulty of mining the cryptocurrency. Experts are predicting things ranging from a complete collapse to multiple increases.
History and application of Bitcoin
Bitcoin was created by an anonymous developer under the pseudonym Satoshi Nakamoto. In 2009, the world’s first transaction was made – the transfer of the coin between users’ wallets.
For several months, the cryptocurrency was only in the accounts of enthusiasts. The use of bitcoin as a means of payment began in May 2010. One user received 2 pizzas for 10,000 BTC. This was the very first purchase of real goods for digital coins.
Since then, the situation has changed. The popularity of the asset grew due to its use in transactions with prohibited items. Later, bitcoin and altcoins began to be used for legal transactions as well. Cryptocurrency became a full-fledged means of capital accumulation, the unit of payment. Companies accept bitcoins and altcoins as payment. However, people still see digital money as an anonymous medium. In fact, that is not the case: transaction information is publicly available and stored in a blockchain on the computers of millions of users.
Why bitcoin is so expensive
BTC is the first successful digital currency to gain public trust. This is why Bitcoin is so expensive right now. In addition to reliability and trust, there are other factors:
- A limited number of coins.
- Expensive maintenance of the system.
- The influence of the big players.
- Growing demand for digital money.
- Lack of connection to other assets.
- The rise of altcoins.
- News.
Limited Issuance
Bitcoin has a feature that distinguishes it from any fiat currency. Its issuance is limited. No more than 21 million digital coins can be created. At the same time 90% of this amount has already been mined. This affects bitcoin quotes. Owners of the coins expect an increase in the rate, which will lead to an increase in revenue from the sale.
Faith
Digital assets are becoming more popular and accessible. The network of cryptocurrency exchanges and other services is growing. It has become easier for traders to trade. Cryptocurrency is a powerful investment tool, a means to make money. Ordinary people can engage in trading. As a result, there is user faith in the future of bitcoin and altcoins. Against the backdrop of this attitude, the price of BTC and the popularity of coins is growing.
Expensive to maintain the system
Mining costs and transaction fees are increasing. There are other costs to maintain the system. In 2021, the electricity consumption for transactions and other operations in the Bitcoin blockchain is 182.12 TWh. This is roughly equal to the energy costs of a country like Thailand.
No connection to other assets
Cryptocurrency is based on complete decentralization. There is no regulator that affects the value, controls transactions, sets commissions. Bitcoin is not tied to any fiat currency, gold.
Therefore, large companies and individuals have invested large sums in the cryptocurrency. In their opinion, it helps to secure their savings from the influence of factors of the real economy and the financial system and crises. For example, the rate of the Russian ruble depends on the cost of oil and gas. The crisis in the automotive industry due to the lack of microchips affected the price of the yen, the euro and the national currencies of other countries in whose economies the machine industry occupies a significant share.
Digital assets have no such disadvantages. Their price is determined by domestic demand, not by the situation of national economies.