Bitcoin is undoubtedly the most prominent and fastest-growing cryptocurrency in market capitalization. Despite its volatile nature, people keep purchasing this digital currency. But what’s the reason for this growing confidence in Bitcoin? Well, people have varying reasons for purchasing and using Bitcoin. Initially, people thought Bitcoin was a scam. Some compared Bitcoin to gambling due to its volatility. Similarly, some investors dismissed Bitcoin as a passing cloud.
However, Bitcoin is now a digital asset that has drawn attention from all kinds of investors. People are investing in this virtual currency all over the world. Platforms like the bitcoin-up.live have made it easier for individuals to purchase Bitcoin using fiat money. Consequently, many investors can now access this electronic currency from any part of the world.
Large institutions, famous billionaires, and retail investors are buying this virtual currency. And this is happening after Bitcoin hit what some people have considered the all-time high price and started to drop. So, why are people so confident about Bitcoin’s future? Here are some of the reasons.
The Lowering Dollar Buying Power and Inflation
Since Richard Nixon removed the gold standard in 1971, the circulating dollars amount has increased steadily. The U.S. raised the total money in circulation from $273.4 billion to more than $4 trillion between 1975 and 2020, when the coronavirus hit. By November 30, 2020, the U.S. had more than $6.5 trillion in circulation, mainly because of the stimulus bills.
And Congress can pass a stimulus bill to add almost $1 trillion to help the coronavirus patients. If this stimulus bill goes through, the world will increase around 50% of the U.S. dollars printed in 2020.
At the same time, many people don’t have jobs, while some businesses have shut down. And increasing money supply will significantly affect the dollar’s purchasing power. Initially, people used precious metals like gold as a value storage. That’s because such items have a limited supply.
Unfortunately, nobody knows the amount of the existing gold. Additionally, nobody knows whether gold is available outside this planet, and people could one day obtain it through asteroid mining or other technologies.
Bitcoin has anti-inflation properties because no government or central bank can print or mint it. Instead, Bitcoin uses blockchain technology, via which people use computers to produce new tokens. What’s more, this technology caps Bitcoin supply at 21 million coins. And this explains the increasing price of this cryptocurrency as miners near the last coins.
Bitcoin Halving
Halving is an inbuilt mechanism that gives Bitcoin a verifiable limit. Whenever miners generate 210,000 blocks or after four years, the Bitcoin network rewards them for completing transactions. And the network reduces this reward by half every four years.
Simply put, Bitcoin has inbuilt synthetic inflation because the reward adds new coins into the market. However, this system cuts the inflation rate by half every four years. What’s more, this act will continue until miners generate all the 21 million bitcoins into the market.
Increasing Acceptance and Adoption
As hinted, many people see Bitcoin as a value storage. And this has prompted many people to purchase and hold onto this virtual currency. Even some private and public institutions now buy and store Bitcoin, hoping its value will keep increasing.
Also, the number of merchants accepting Bitcoin payments is increasing by the day. Today, people can purchase goods and services using this virtual currency. Some central banks are also considering the idea of creating their digital currencies. All these moves have installed confidence in people that were initially skeptical about Bitcoin.
Final Thoughts
Bitcoin is a relatively new invention. And like most inventions, people are always skeptical about their capabilities and ability to last. Nevertheless, Bitcoin properties and the technology behind it have instilled confidence in most people.
