Why Bitcoin Hits an All-Time High (Why Bitcoin Rises in Value)

Why Bitcoin Hits an All-Time High. According to Coinmarketcap data, as of May 12th, the price of Bitcoin is $40,000, which has increased by 20% in the past week.

According to coindesk analysis, within a few days, due to the review and freezing of funds of Russian users by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury and other factors, the price of Bitcoin hit a new all-time high. But as Bitcoin continues to rise, more and more people have doubts about Bitcoin as an investment tool and consider it a risky asset.

Therefore, it is necessary to explain why Bitcoin has become such a bull market: Bitcoin has been rising fiercely since last year and has been steadily climbing since 2017. Recently, it has undergone some major adjustments, such as Bitcoin halving and Ethereum 2.0 contract upgrade.

However, these changes did not increase the demand for cryptocurrency or raise doubts among the crypto community. Despite such concerns, many traders were worried about the potential collapse of Bitcoin before its price skyrocketed.

For example, in early November 2017, a Twitter user asked, “If I really want to know what a real ‘Bitcoin’ is?” He answered, “It’s just a speculation.” However, this Twitter user pointed out that this was “wrong” because he claimed that the application allowed the use of Bitcoin to purchase goods, services, and software-including payment, storage, and management of personal information. “

The original article is from zycrypto, compiled and translated by the Blockchain Knight, and the English version is copyrighted by the original author. Please contact the editor for Chinese reprint.

Why Bitcoin Rises in Value

Why does Bitcoin rise in value?

Today, we will explore why BTC has reached its current price.

First, let’s look at the history of Bitcoin’s birth. This is not the first time it has had such an astonishing increase. Around February 1, 2010, when the US economy was in recession, central banks around the world began to consider buying US dollars and cryptocurrencies as reserve currencies. However, due to the quantitative easing policy of the Federal Reserve, global inflation escalated rapidly, so such a situation has not occurred since then-the 2008 financial crisis has greatly increased the demand for gold. So we believe it is time to make assets more stable: for example, Bitcoin has become a means of value storage because it is digital gold and can be used to exchange goods, services, or payment methods. But for those who are not familiar with blockchain, they may ask, why does it have such an impact so quickly?

In fact, the reason why Bitcoin can rise is that its decentralized nature and its tamper-resistant characteristics make it resistant to censorship, ensuring the security and anonymity of the transaction process, thereby realizing a highly liquid “borderless” currency system. So why does this phenomenon occur? The answer is simple: Bitcoin itself has a certain circulation function and is very scarce. As more and more investors enter this field and include it in their portfolios to make profits, this means that if the price of Bitcoin cannot be maintained above $10,000 or reach $20,000, it will form a bubble and trigger more speculation activities in the future. And further expand the market scale. It should also be noted that at the beginning of 2020 (in March 2019), the market value of Bitcoin once exceeded the $100 billion mark. However, it took four months to recover to a level of over 300 billion US dollars until mid-October this year, it set a new high again. At the end of 2020, there were rumors that China was developing an electronic wallet based on the internationalization of the renminbi to attract more funds.

Next, let’s take a look at the technical principles behind Bitcoin: mining difficulty decreases, so does the mining cost; mining difficulty increases, mining rewards decrease, and Bitcoin mining profits decrease; usage difficulty decreases. Currently, the Bitcoin hash rate is about 21 million TH/s, accounting for about 50% of the total effective computing power of the entire network, and the total amount of mining output is close to 80%. The mining efficiency of Bitcoin is low, with a network cost of up to 100 yuan per T; BitMain’s electricity cost is 25% lower. Moreover, through calculation, each server consumes power for less than 24 hours a day, so Bitcoin only needs to consume about 50 jobs to get block subsidies each year.

According to the latest data, since 2018, the average income of Bitcoin has exceeded 20 million US dollars per time period. The total amount of Bitcoin mining has also reached 1,500, which is equivalent to half of the entire Bitcoin market. Based on this rate, Bitcoin’s annual income is expected to be nearly 2 billion yuan.