We have heard a lot about cryptocurrencies in the last decade, and not all of the news seemed to suggest that Bitcoin, the most popular cryptocurrency in the world, is going to reach the current status. Despite the pessimistic opinions of many experts in the industry, Bitcoin now has an impressive value, and it doesn’t seem that this will change any time soon.
However, you might be wondering, “how did we get here,” and if that’s the case, then we have good news. In a moment, we’ll explain why the price of Bitcoin has reached the current level.
Anonymity
One of the most important reasons why Bitcoin became so popular is because of its anonymity. When you buy a cryptocurrency, you are not required to provide proof of identification. This makes it harder for financial institutions or governments to identify the people that make the transactions. This was one of the main reasons why many people started taking Bitcoin seriously.
Market Volatility
While some individuals consider market volatility to be a negative aspect, others look at it as an opportunity. If you are one of those people, then you might be interested in investing in cryptocurrencies because of their high volatility. For comparison, you can check out this gold vs Bitcoin chart.
The price of Bitcoin tends to change dramatically all the time. It’s not uncommon to see the price of Bitcoin fluctuate from one day to another day. However, this also means that if you are able to spot the right opportunities, you can make a lot of money through investing in cryptocurrencies.
Limited Supply
Like physical currencies, cryptocurrencies have a limited supply. However, in this case, the situation is quite different. While physical currencies can be printed as much as needed, cryptocurrencies have a limited number of coins that can be mined. The first cryptocurrency on the market, Bitcoin, has a limited supply of 21 million coins, and only about 17 million coins have been mined. This means that there are only 4 million coins left to mine.
No Third-Party Interference
Another reason why many people prefer using cryptocurrencies over traditional payment methods is because they don’t want their personal information to be revealed. In traditional banking systems, banks and governments need to know your information in order to verify your identity and approve or decline your transaction. With cryptocurrencies, however, you don’t need to reveal your personal information, which means that you remain anonymous.
Supply and Demand
As we have already explained, cryptocurrencies can have a limited supply, which means that the demand has to be higher in order for the price to increase. This is exactly what happens with Bitcoin. The more people want to buy it, the higher its price becomes.
The Cryptocurrency Market Is Becoming More Stable
As we have mentioned, one of the reasons why people turned towards cryptocurrencies was because they wanted to make some money. If you invested $100 in BTC 10 years ago, then you would be worth a fortune today. It doesn’t mean that everything is perfect in the cryptocurrency market at this moment, but it is getting there slowly but surely.
People are starting to understand what cryptocurrencies are and how they work. More and more businesses around the world are accepting payments in Bitcoin and other similar currencies, which is only a good thing for everyone involved.
How Does it Work?
One of the main reasons why this currency has evolved over time is because of its mining process. This currency uses a blockchain ledger, which is a decentralized database that stores all information about Bitcoin transactions.
This ledger can be read and verified by anyone who wants to do so, and its integrity depends on how many people are verifying it right now. That means that if someone tries to change the data on the ledger, they will have to do it collectively, which isn’t easy at all.
However, your computer can’t verify every transaction that has ever taken place on the ledger. However, if you have a powerful machine with a lot of processing power, then you can mine those transactions in exchange for Bitcoins. Each transaction requires a certain amount of energy and time to be verified by “miners,” and the reward for doing so is that miners get a small percentage of the transaction fee.
Conclusion
Bitcoin is one of the most popular cryptocurrencies in the world, and for a good reason. It’s anonymous, decentralized, and it’s available at any time. However, as we have explained above, there are several reasons why the price of Bitcoin has exploded. If you are not familiar with these reasons, then we encourage you to read this guide again and learn more about the reasons why the price of Bitcoin has grown so much.
