Why The Sudden Inflation In The Bitcoin Price?

Let’s discuss the Bitcoin price. Bitcoins are indeed one of the technological revolutions, which has enabled countries to benefit from these technologies and also position themselves early on the progress, just like the US railway system in the 1800s. In Europe, Germany took the opportunity to restructure and switching their position on digital currencies, even recognising them as account units.

For almost two years now, Bitcoin has been trading at its highest price, according to cryptocurrency experts. This can be attributed to several factors, including Asia’s market stage. From 2014 till now, minus a correction which was long due the bitcoin price has continued to increase

This article attempts to examine three reasons for the cause of bitcoin inflation, in order to be better informed.

High Demand in Asian markets

Most financial experts and economists in the Far East have expressed their fears that the Chinese Yuan could depreciate, therefore more investors are turning to bitcoin. The Yuan’s depreciation has led to an increase in bitcoin appeal for populations as an asset for those who lack in investment choices.

In addition, this is further collaborated by the low confidence in local currencies in Asia markets, which in turn boost bitcoin demand in the region.

Tightening supply

Bitcoin has this unique feature where new coins are discovered or rather “mined” and added into circulation. The difference with fiat currency where governments just print new bills to add to circulation. When new coins are mined, a record is added into the blockchain. The blockchain is a giant ledger that records all bitcoin transactions.

In addition, bitcoin miners are rewarded with bitcoin sets, usually 50 bitcoins, for every successful mining operation. However, due to the potential dangers of inflation, this practice was halved in 2012. It is still expected to halve even further, leading to constraints in the supply-side.

There have been rumours about bitcoin supply rising, citing the further halving of bitcoin miners reward.

Bitcoin’s becoming more robust

Recent developments focused on bitcoin performance improvement has been undertaken. This is an effort to make bitcoin transactions more reliable to the consumer. New technology has made it easier for people to use bitcoin, in comparison to the former years. Payments using bitcoin are becoming faster, cheaper and most importantly, on a grander scale.

Therefore, making bitcoin more robust is a way to make cryptocurrency look attractive to prospects and investors.

The Bottom Line

Prior to its development, bitcoin has presented a variety of opportunities that didn’t exist. However, it has failed to convert investors from traditional currency to its adoption as an alternative currency. According to the IRS, bitcoin is a taxable asset and this has clarified the situation to the investors. The promise of smooth value transfer suggests creative use n foreign direct investment. In the coming years, much of the bitcoin volatility will be driven by investor perception as adoption increases.

 

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