Introduction:
The prices of Bitcoin have risen by one ninety – five percent since 2016. This has turned into a currency that does not have depreciation but the value of Bitcoin keeps on rising. When the currency was issued it was known for the scams people did by using its name. But as time passed the influence of Bitcoin grew, billionaires and owners of large firms began to invest in it. the reasons for the appreciation of Bitcoin vary. So, let us discuss what makes Bitcoin ever-increasing virtual currency.
Economic Recession causing a decrease in the purchase of the US Dollar:
Gold was the currency that determined the exchange rates in the past but when the regime of President Nixon begun the gold was replaced with the United States Dollar. So, the supply of the United States dollars increased from the time of President Nixon in 1975 till the initiation of COVID 19. The total amount of the United States dollars supplied was four trillion dollars. This supply elevated during coronavirus and reached 6.5 trillion dollars with Congress still in the process to pass one trillion dollars in another bill for helping the people who are suffering from this pandemic. Although many people became jobless during this pandemic but this nearly fifty percent of the rise in the supply of United States dollars has left an ever-lasting impact on the purchasing power and value of the dollar.
In these circumstances of joblessness, there was a threat of another wave of inflation. So, to protect themselves from inflation the owners of big firms started investing in the assets and bitiq.app that either maintained their accounts on the price they are or they started to make them appreciate. This increased the value of Bitcoin as an investment currency that was less likely to ever meet depreciation. In this way, Bitcoin became the store of value. Things that we have less in quantity including metals like diamond, gold, etc. are also considered as a store of value. So, COVID 19 has made it crystal clear for investors to think about which currency they should store and in what quantity.
Relationship between Bitcoin and Dollar:
The question arises that why are we discussing the rise of dollars in the rise of Bitcoin. Let us explore that why dollars matter for Bitcoin. Irrespective of the supply of the store of value containing other products, the supply of Bitcoin is well known and it is measurable. The reason behind this is that Bitcoin runs on coding as it is a virtual currency. So, the coding is known by all and it is known that how many have been done before and how many more will occur after that. So, the supply of Bitcoin is finite. However, dollars are printed in an unlimited supply and sometimes they are also given in the form of loans and those loans can be forgiven at times. So, this makes the value of Bitcoin elevate more.
Bitcoin Coding and Mining:
We often discuss the benefits that the miners are given when the price of Bitcoin elevates but do you know when the mining company successfully mines 210,000 blocks the value of money it is given for mining reduces to half. The same condition applies after every four years of mining. This process is called halving. This mechanism is beneficial for explaining the less amount of supply of Bitcoin as compared to the United States dollars. This is because when the miner is awarded for mining he releases a Bitcoin in the market so now around 18.5 million Bitcoins are circulating in the market from participants to the miners. This makes a total supply of 88.4 percent Bitcoins.
So, every time after halving the price of Bitcoin increases by two which is why the ratio of Bitcoin to its stock to flow remains consistent. In this way, the price of Bitcoin doubles after every four years.
Conclusion:
The article has discussed some of the causes that are responsible for elevating the value of Bitcoins. One such reason for the rise of the value of Bitcoin is the unlimited supply of dollars as compared to the limited supply and known coding of Bitcoin. Halving is the process that explains the finite supply of Bitcoin making it a useful currency for investment. This makes the ratio of Bitcoin and its stock of flow at a constant value so the value increases after every halving.
