Bitcoin (BTC) has a finite supply. There will only ever be 21 million Bitcoin in existence. This is a key factor in the value of Bitcoin and is crucial to understanding why Bitcoin is rising in value today.
I’m not a prophet, I don’t own any magical crystal balls, I don’t even own any magic 8 balls — I don’t claim to know every factor that contributed to the price of BTC going up.
I do know, however, that all the factors below are contributing to its’ next parabolic run.
So, let’s talk about why Bitcoin is going up in 2019.
The chart above plots the price of Bitcoin (the black line) over time, compared against the colored bands, which represent the % of Bitcoins supply that has not been spent within a certain time frame. The blue bands at the top represent the % of Bitcoin in existence that hasn’t been spent in over 5 years. The red bands at the bottom represent the percentage of Bitcoin that hasn’t been spent in less than 1 day.
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There are more HODL’ers
You’ll notice that while the total supply of Bitcoin is rising, the liquid supply of Bitcoin is decreasing. This is represented by the growth of the blue bands in the top right corner of the chart. As mentioned, these bands represent the % of Bitcoin in circulation that hasn’t been moved or spent in over 5 years, it represents the HODL’ers.
Right now, around 20% of the total supply of Bitcoin hasn’t been spent in over 5 years, meaning 20% of the supply is currently being held for the long term, or maybe even lost due to forgotten keys and passphrases.
Regardless, it shows that the liquid supply (amount of coins available to be spent) of BTC is shrinking, while the total supply (amount of coins in existence) grows.
In approximately 330 days, the Bitcoin mining reward will be cut in half. Let’s take a few steps back so we can better understand what that means, and what it will do to the value of Bitcoin.
Bitcoin is minted when a miner or group of miners finish validating a block of transactions (think of a block of transactions like one page in a financial ledger). Miners are like blockchain accountants, they set their computers to validate the transactions occurring on the Bitcoin ledger, and whenever they mine a new block they are paid 10.4 Bitcoin. That 10.4 Bitcoin is newly minted cryptocurrency that didn’t exist until a new block was mined- this is how the supply of Bitcoin increase
Several traders have been quite vocal about Bitcoin never dropping below $10,000 again. I don’t know how confident I am in that. I could see Bitcoin dropping to around $6,000 before resuming its trip upward. However, if we blast through the resistance around the $13,000 level, the momentum might be enough to carry us beyond $20,000 to set new highs.
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