Hot Features
Premium
Register to chat with like-minded investors on our interactive forums.
Bitcoin is a currency that was developed in the year 2009 by Satoshi Nakamoto. The name was given to the unknown creator of the currency. Of course, transactions are all recorded in the blockchain and this shows the transaction history for every unit. It’s used to prove ownership in the blockchain. Buying a Bitcoin is of course, very different to buying stocks or bonds because Bitcoin is not actually a corporation and is, therefore, not a security. There are no corporate Bitcoin balance sheets and there is no central bank either. This means that economic growth, inflation and the monetary policy that influence a normal currency do not affect Bitcoin. Bitcoin prices are normally influenced by the following:
- The supply of Bitcoin
- The demand of Bitcoin
- The cost of producing Bitcoin
- The rewards issued
- Competing currencies
- Internal governance
Unlike traditional investing, Bitcoin is not issued by a central bank and it is not backed by any government either. Countries which do not have a fixed foreign exchange rate can control, in ways, how much of their currency circulates. This is done by adjusting the discount rate and it is also done by changing the reserve requirements too. With all of these options, a central bank can easily impact a currency’s exchange rate. Another thing that affects the currency is how mainstream it is. As more casino sites adopt new forms of currency, this pushes Bitcoin higher. Sites such as comeoncasino.net as an example already accept a wide range of currency options, but at the end of the day, this is going to increase even more in the next few years.
Bitcoin Protocol
The supply of Bitcoin is actually impacted in two different ways. First of all, the Bitcoin protocol gives rise to new Bitcoin at a fixed rate. New coins are then introduced on the market and this is when miners can access them over time. The production of Bitcoin slows over time. It was 6.9% in 2016, but now it is 4%. This creates scenarios which help the demand for Bitcoin to increase at a bigger rate. As the supply increases, this then drives up the price. The slowing of the Bitcoin circulation is down to the having of blocks. These block rewards are offered to miners, and they are thought as being a form of artificial inflation for the ecosystem.
The Supply of Bitcoin
The supply may be impacted by the amount of Bitcoins in the system. This number of available coins is capped at a total of 21 million right now but when this number is reached, the mining activity will no longer create new Bitcoins at all. The supply of Bitcoin reached a total of 18.1 million in December and it actually represents 86.2% of the supply. This will ultimately be made available. When this amount is reached, the price will then depend on how practical the Bitcoin is. It will depend on how it can be used in commercial transactions and it will also depend on the artificial inflation method as well.
