The popularity of bitcoin, much like its value, has been in a state of flux for the past several years, but the fact that it has stuck around this long lends further credence to the staying power of the cryptocurrency. There have been questions as to how it will continue to grow in 2016 and whether or not it has the room to do so. Thankfully, due to measures coded in the very fabric of the currency itself, not only are we ensured of the capacity for continued growth, but a sharp increase in bitcoin’s value as well.
Most people with even a passing interest in bitcoin are aware that bitcoins are developed through the process of mining. In layman’s terms, mining entails calculations being performed with specially designed software and hardware. However, many might not be aware that “a maximum of 21 million bitcoins can be in existence at any one time” and that the value of mining is regulated in order to maintain this number. To prevent miners from surpassing this limit, the currency is designed to cut the value of mining in half every four years. This is one of the biggest differences between bitcoin and a “fiat” currency such as the dollar, which can be printed in unlimited amounts to increase or decrease its value.
There are 15 million bitcoins in circulation as of April 2016 and the next halving of the mining value is set to take place July 11, 2016. In short, if 150 bitcoins are able to be produced each hour, then after July 11 only 75 will be produced in that same amount of time. This could have a major impact on the overall value of the currency, which has been on a steady rise in 2016 after recovering from a 2015 drop. If demand for bitcoin continues to grow while the number of coins that can be mined is drastically decreased, the value should naturally surge. Really, it’s the basic law of supply and demand at work.
The last time the mining value was halved took place on November 28, 2012 but back then the currency was still in its infancy. If you can imagine back then, a bitcoin was valued at around $12 with a market capitalisation barely more than $100 million. Considering that the value is now worth more than 30 times that with a market cap of $7 billion, this year’s halving will have much larger ramifications on the market and the economy as a whole.
This potential spike in the value of the currency has many speculators looking to invest in it. The likelihood of bitcoin’s value raising this summer has some comparing it to a cheap growth stock. We’ve already seen one meteoric rise and fall of bitcoin back in 2013, but since then it has steadily regained value. And it has only continued to stabilise and become a more legitimate option for both casual investors and consumers. The current value of bitcoin is hovering around $450 and we expect that to steadily increase following the mining announcement this July.
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