Limited Supply of Bitcoin Fueling Price Surge: Experts Debate
bitcoin's Soaring Price: Scarcity and Demand Drive Crypto's Record-Breaking Rally
The digital currency bitcoin surpassed the $100,000 mark for the first time last week, setting a new milestone, and triggering discussions about the reasons behind this historic rise. President-elect Donald Trump has joined the chorus of voices attributing this accomplishment to the crypto-friendly environment he is expected to foster in the White House.
On his Truth Social platform, Trump posted "YOU'RE WELCOME!!!" in response to the news. However, experts argue that focus on the surge of demand for bitcoin may overlook the crucial role played by the scarcity of its supply.
At its inception in 2009, Bitcoin founder Satoshi Nakamoto set a limit of 21 million bitcoins, with approximately 19.8 million currently in circulation. This finite supply, scheduled to be fully mined around 2,140, contributes to the slow and steady release of the remaining currency.
The absorption of this limited supply by investors, coupled with an increasing appetite for the world's largest cryptocurrency, is believed to drive up its price. The prominent role of scarcity in driving the price of bitcoin is similar to how the scarcity of water in a desert or a game-worn athlete's jersey would impact their value, according to experts.
Nonetheless, some experts suggest that investor appetite is the main force that sets bitcoin's price. As new demand arises, if sellers are unwilling to offload their bitcoin, the price will rise to satisfy demand. The slow creation of new bitcoins and the resulting lack of readily available supply amplify this price increase.
Some skeptics, however, point to the limited supply as bitcoin's saving grace. If viewed as a medium of exchange, Bitcoin has yet to be widely adopted. Nevertheless, they argue, the digital asset's scarcity gives it inherent value due to its limited supply.
Amidst these debates, experts encourage potential investors to consider the attractiveness of Bitcoin's limited supply. Nikhil Bhatia, a finance and business economics professor at the University of Southern California who studies cryptocurrency, highlights that Malibu properties fetching million-dollar-plus prices illustrate the appeal of prized assets.
As for the trajectory of Bitcoin's supply being baked into its price, some analysts argue that it is the ever-expanding investment in Bitcoin by everyday people and financial institutions that propels its value.
The surge in the price of Bitcoin following Trump's election and the US approval of Bitcoin ETFs have both played influential roles in driving its growth. As the price of Bitcoin rises, experts anticipate more demand, generating large price swings, a characteristic often associated with Bitcoin.
Investors absorbing the limited supply of bitcoin, coupled with increasing demand for the world's largest cryptocurrency, is believed to drive up its price, similar to how scarcity in a desert or a game-worn athlete's jersey impacts their value. On the other hand, some analysts argue that the ever-expanding investment in Bitcoin by everyday people and financial institutions propels its value, with the trajectory of Bitcoin's supply being baked into its price.
