People love to ask “Why Is Bitcoin Going Up?” and the answer is pretty straight forward: Bitcoin is engineered to preserve value over time. This is in stark contrast to the prevailing financial system which is designed to expropriate value from its users. Satoshi wrote:
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”
Why is Bitcoin Going Up? A Question of Values
The ascent of Bitcoin’s value isn’t merely happenstance but a direct consequence of the principles imbued in its design by its creator(s). Bitcoin is architected not just to maintain, but to enhance purchasing power over time, directly confronting the inherent deficiencies of traditional financial mechanisms.
The rise in Bitcoin’s valuation is a complex interplay of its intrinsic characteristics, escalating adoption, and the fundamental economic laws of supply and demand. This article will dissect all these things to help you understand the multifarious reasons contributing to Bitcoin’s escalating worth.
Limited Supply and Increasing Demand
One of the most fundamental reasons for Bitcoin’s appreciation is its capped supply.
Bitcoin’s protocol dictates a maximum supply of 21 million coins, a feature that introduces scarcity to the digital asset. This scarcity, akin to that of precious metals like gold, plays a significant role in Bitcoin’s value proposition.
As demand for bitcoin grows—whether from enthusiasts, institutions, or nations seeking an asset outside government control—its capped, unalterable supply naturally leads to price increases. This is because with more entities competing to acquire the finite number of coins, if the availability cannot change, then these entities must bid up the value if they want to acquire bitcoin with fiat currency.
Fix The Money; Fix The World
The essence of “Fix the Money; Fix the World” captures a nuanced understanding of societal dynamics and human behavior. It means that observing wealth accumulation through dubious means at society’s higher strata can lead to a moral justification for theft among those at the bottom.
This perspective is deeply rooted in the human psyche’s drive for fairness and the tendency to emulate behaviors perceived as successful or acceptable within societal norms. The glaring disparities in wealth, especially when they seem to arise from unfair advantages or outright theft, naturally incite a sense of injustice, prompting individuals to rationalize theft as morally justified.
Bitcoiners argue the notion that addressing the root causes of economic disparities and championing a more equitable financial system can reduce the impetus for such justifications of theft. The goal is not to guarantee equal outcomes but to ensure everyone has access to a level playing field.
Bitcoin, with its immutable rules and decentralized nature, contrasts sharply with traditional systems like fractional reserve banking, which creates money out of thin air and charges people interest on that money. The world needs a financial foundation for economic interaction that is based on transparency, fairness, and integrity. Not one based on debt and violence.
Institutional Adoption
Enthusiasts champion Bitcoin as superior money, with a growing trend among Bitcoiners to not only save in bitcoin but also to measure their wealth in satoshis. While the mainstream institutional perspective predominantly categorizes Bitcoin as an investment vehicle, the landscape is shifting.
The burgeoning participation of institutional investors has emerged as a pivotal force propelling Bitcoin’s value upwards. Institutions, wielding the financial clout to invest millions or even billions, exert a profound influence on market demand, unlike most individual investors whose contributions, though significant, are comparatively smaller.
As Bitcoin gains recognition among corporations, financial entities, and investment funds as a credible asset class and a viable hedge against inflation, their engagement infuses the market with heightened confidence and demand. This collective institutional movement not only validates Bitcoin’s legitimacy but also acts as a catalyst for price escalation, marking a significant phase in its adoption curve.
Inflation Hedge
Amid escalating financial instability and pervasive inflation across numerous economies, Bitcoin has emerged as a formidable inflation hedge and a reliable wealth preservation tool, independent of sovereign nation-state controls.
Fiat money in its current form is subject to potentially limitless printing by central banks, resulting in money’s store of value function to be ruined. Bitcoin does not have this problem. Coupled with Bitcoin’s global accessibility, it positions itself as an attractive alternative for both individuals and institutions aiming to safeguard their assets against the eroding effects of inflation and monetary control.
Consequently, Bitcoin’s reputation as “digital gold” has strengthened, underpinning its rising value as more investors turn to it for security in uncertain economic times.
Technological Advances and Network Effects
The continuous improvement and development within the Bitcoin ecosystem also play a crucial role in its rising value. Innovations such as the Lightning Network enhance Bitcoin’s scalability and usability for everyday transactions, expanding its potential beyond a store of value to a medium of exchange.
As the network becomes more robust and user-friendly, the network effect takes hold: more users lead to greater utility, which in turn attracts more users, creating a positive feedback loop that enhances Bitcoin’s value proposition.
Macroeconomic Conditions
Bitcoin’s price movements are influenced by broader macroeconomic conditions as well. Economic instability, geopolitical tensions, and shifts in monetary policy can lead investors to seek safe-haven assets. With its decentralized, borderless, and censorship-resistant qualities, Bitcoin offers an even better money to individuals than traditional safe haven assets like gold. As such, during times of economic uncertainty, an influx of investors turning to Bitcoin can drive up its price.
Conclusion
There are a lot of variables that play into the spot price of bitcoin. These factors driving Bitcoin’s value upwards are deeply interwoven with its core principles and the evolving economic landscape.
Its capped supply, coupled with increasing demand from both individual and institutional investors, positions Bitcoin uniquely as both a hedge against inflation and a better form of money for humanity with tons of untapped potential. As the Bitcoin network continues to mature and global economy worsens, conditions underscore the need for decentralized, non-sovereign money. Bitcoin rises as viable solution, as its trajectory appears poised for further ascension.
