12 January 2023
By Roger Kennedy
Bitcoin does not involve any central financial institutions to verify its transactions and also has various uses that can transfer funds through BITLQ.NET anonymously for B2B or B2C transactions. However, due to the absence of government, it does need any intermediaries, as it uses blockchain to verify its transactions, which is an independent base used to store crypto transactions and uses an open public ledger to store the transactions. Blockchain also facilitates DLT technology, which means having multiple partners for a business makes it easy to maintain different ledgers in a single space.
Bitcoin is fixed with a supply of 21 million; this bitcoin can only be formed or created. Having a fixed supply can benefit Bitcoin and other customers of Bitcoin because a fixed supply will lead to an increase in the prices of Bitcoin, and the investors of Bitcoin can earn a good profit through it. With the fixed supply, Bitcoin does not create a chance of excess supply in the market because Bitcoin is not created. They are mined. The mining of Bitcoin involves a complicated process through which Bitcoin gets mined. Mining Bitcoin consumes a considerable amount of electricity, and different software and hardware are used for mining. With the complex process of mining, there is no chance of excess application for Bitcoin in the market, thus creating a solid reason for the increase in the prices in the coming future.
Effect of fixed supply over Bitcoin prices
- Through a study, we learned that around 80% of the total Bitcoin is already mined, and the last Bitcoin over 21 million of the total bitcoins is going to mind in 2140. However, all the new minds of Bitcoin will not trade around the market because several reasons can decrease the number of available Bitcoin in the market. The bitcoins stored in the wallets and the user has forgotten their private keys stop other investors who have stored Bitcoin as a long-term investment or stored them like their other physical assets. These reasons bring down the numbers of total Bitcoin used for trading in the market.
- Those supporting a fixed supply of Bitcoin assume that with a limited supply, Bitcoin is creating a chance to gain in its prices. This situation can also create digital scarcity. Also, we all know that Bitcoin does not have any financial institutions’ role in its monetary affairs, and supply and demand cannot be affected by the government and other banking institutions, which separates it from the global financial system. So the common supply demand and the prices of Bitcoin cannot be centralised and controlled by the government. Just like the central bank can control the printing of notes with a quantitative easing strategy.
- Fixed supply there are some of the drawbacks that are coming to crypto investors that when everyone comes to know that Bitcoin has a fixed supply, people will stop spending Bitcoin and other digital assets for trading. And this can lead to an unbelievable hike in the prices of Bitcoin due to high demand and the minimum amount of Bitcoin left for trading in the market. It can also create inflation when only a few bitcoins are left in the market to trade, and many of the customer bases are ready to buy Bitcoin.
- Virtual currency like Bitcoin is a finite asset. Some crypto experts are comparing virtual currency is digital gold. During a deflation situation, the prices of the other commodities may fall, but the crypto prices as a store of value will rise simultaneously. Through a study, it was confirmed by crypto experts that crypto is assumed as a more stable currency than the global economy today.
- No one can predict Bitcoin’s future and the next minute’s prices. There are equal chances of increasing and decreasing Bitcoin prices in the coming future. When almost all the bitcoins are mined, and only fuels are left to trade in the market, the one who wants to buy Bitcoin will have to wait for the Bitcoin to become cheaper. But due to inflation, we cannot control the situation, and the prices will get a regular hike.
These are some impacts of Bitcoin’s fixed supply over its prices. It is assumed that Bitcoin will increase prices in the coming future when no Bitcoin leaves to be mined. On the other hand, there are some drawbacks of Bitcoin that should keep in mind before investing in Bitcoin. You should get the required knowledge of Bitcoin’s price volatility and regularly changing government rules regarding crypto. The absence of government in these virtual currencies is the most significant drawback of owning a Bitcoin. Because if you lose your money through fraud or cyber-attacks, you may not have any solid point to register a complaint against the theft made with you. Getting the required knowledge to get minimum profit from bearing a considerable loss.