Explain the reasons for the rise in the value of Bitcoin and became expensive? What are the reasons that contributed to the rise in the price of Bitcoin? It became expensive (top 10 reasons)
?Why is Bitcoin so expensive? What are the reasons for the price of Bitcoin to rise
Bitcoin is a digital currency used by the vast majority of crypto or digital currency users. In addition to that, bitcoin is also the name of the open source computer network where its transactions are recorded.
Over the past years, the bitcoin currency has witnessed a significant increase in the value of the bitcoin currency, and everyone is looking for the reasons for the rise in the price of bitcoins.
Transactions are verified by powerful computer networks and a global network of validators. This makes it easier to create and use bitcoin, but by making it volatile, prices have increased over time. The price of one bitcoin soared to over $19,000 in 2017 before dropping below $6,000 late last year and becoming expensive. Everyone is wondering what are the most important reasons that made the bitcoin so expensive. Here are the top 10 reasons why the price of bitcoin has increased dramatically and made it expensive and expensive.
Increased interest in bitcoin
The growing interest in Bitcoin is causing the price of Bitcoin to skyrocket and make it more expensive compared to other major cryptocurrencies or digital currencies.
The demand for digital bitcoin is driven by a crypto or digital currency exchange where users can trade bitcoin for other digital currencies or fiat money such as the US dollar or the euro. There are also websites that exchange bitcoins for regular money if you have a lot of it already stored with them.
Some investors in the world use their wealth to buy and store bitcoins so that they can make money from higher prices later and this is what makes them so expensive.
In addition, the demand for bitcoin is driven by investors looking for a safe place to store their money online while they wait for their investment to grow in value far beyond what they paid for their coins and this is what makes bitcoin so expensive.
Most of these investments are made using credit cards or other forms of payment that leave user accounts at risk of being hacked or shut down by financial companies without warning.
Many investors in the world prefer to store their money in something less vulnerable to government intervention, such as digital and cryptocurrencies, and instead of paper money in large banks such as the US dollar or the euro, and this made them pay more attention and led to the price of Bitcoin rising dramatically and becoming expensive.
Increasing demand for bitcoin
.png)
The demand for bitcoin is increasing
The increasing demand for bitcoin increases its value and becomes expensive, making the price more expensive than other assets such as gold or silver.
Another reason for the price of Bitcoin to rise and make it an expensive currency is the growth in demand.
Companies and investors see opportunities to make money by investing in bitcoin or using it for transactions.
Bitcoin transactions are documented on what is known as the blockchain
.png)
3- Bitcoin transactions are documented on what is known as the blockchain.
The blockchain is part of the Bitcoin production process and because of its structure, it is difficult to implement, which leads to high production costs which makes Bitcoin expensive. Crypto and digital currencies are closely related to its marginal cost of production, and in economic terms, this reflects changes in total production costs that come from producing or making one additional unit. In other words, a company can earn maximum profit when its production reaches the point where it is equal Marginal revenue and marginal costs together.
This is a type of distributed database that has common nodes of a computer network and is very expensive to operate and expensive when used in cryptocurrency capacity. Bitcoin price increased and became more expensive
Its primary function is to work to keep records of transactions that are not controlled by any bank, individual or group of individuals. This ensures the security and authenticity of data records and generates trust between users for each transaction without the need for third party verification. Usually, the database uses tables to sort electronic data Its structure, however, is that the blockchain builds it into blocks that are connected together electronically All new data is entered into a new block until the block is run at full power This sequences the information together in chronological order, creating a decentralized and irreversible timeline of data .
What does decentralization mean? It is in this context that no person or group, such as a bank, can control any transaction.
When a block is filled, it becomes an irreversible part of the blockchain timeline and is given a specific timestamp.
marginal costs
Marginal costs help a financial institution or other organization improve their production rates through economies of scale, this is an important concept used in managerial accounting and helps significantly in increasing the cost price of Bitcoin more and more widely.
Economic models show that these marginal costs play critical roles in setting bitcoin prices and making them expensive, which challenges recent claims that crypto or digital currencies are virtually worthless.
Bitcoin has fixed and variable costs that may become low and expensive.
Fixed costs are those that remain constant, regardless of the firm's production levels.
These include block maintenance, mining and other operating expenses.
Therefore, more production leads to lower fixed costs per unit, because the total is divided by additional units.
On the other hand, variable costs change according to the firm's production levels.
In other words, the more a company produces, the higher the variable costs and this is what makes bitcoin an expensive currency.
Bitcoin mining and electricity use
Bitcoin mining, i.e. the process by which miners who run computer systems with powerful hardware and high specifications, use to solve various mathematical puzzles, which is one of the main reasons for increasing bitcoins and making them expensive.
Miners use huge tools and machines to solve mathematical puzzles generated by bitcoin algorithms to produce more bitcoins.
This process requires a lot of electricity to operate.
The power that runs the bitcoin mining system typically operates 24 hours a day, 7 days a week, which can lead to a spike in your electricity bill.
This process uses as much or more electricity as some entire countries do, so costs can be huge and significantly higher and this is what makes bitcoins so expensive.
Mining is a necessary part of maintaining a blockchain which includes the existence of Bitcoin.
Energy consumption plays a big role in the reason for the high price of bitcoin.
Miners' fees and bonuses
6. Miners' fees and bonuses
The cost of Bitcoin is higher due to miner fees and various rewards that Bitcoin miners promised as incentives to participate in the mining process.
The task of Bitcoin miners is to confirm and secure monetary transactions by adding new blocks to the blockchain
(or groups of transactions) and this is what makes Bitcoin safe and has a brilliant future in investments over the coming years.
Miners assure investors that bitcoin cash transactions are timely confirmed.
Without these fees, a particular transaction could take days or even weeks to be confirmed.
In fact, the network may reject the transaction entirely and return the money unless the miner's fee is used.
Miner rewards and fees are incentives for miners to participate in the bitcoin system.
This adds to the expenses incurred by people using bitcoins boringly making bitcoin an expensive currency.
As the cryptocurrency reaches the $21 million limit, which is expected to occur in the year 2140, miners will be rewarded with transaction processing fees that will be paid by network users.
These fees ensure that miners remain motivated to mine and keep the network running.
The idea is that the competition for these fees will keep them low after the events are halved.
Therefore, the fees and rewards of miners have a key role in raising the price of Bitcoin and making it expensive.
mining systems
Mining systems add significant and expensive cost prices to bitcoin.
Desktop computers or gaming systems lack the competence to mine bitcoins.
The mining process can heat up these systems and can cause bandwidth problems in home networks.
These machines can cost anywhere from $4,000 to $12,000, however, a single ASIC system does not even produce one complete Bitcoin.
Therefore, miners organize thousands of these machines into pools that run non-stop and generate the 64 hexadecimal number needed to solve the bitcoin hash puzzle and this is the main reason why the price of bitcoin has become more expensive.
Bitcoin network infrastructure
.png)
The Bitcoin network infrastructure entails expensive internet connections that must always be available 24 hours a day, 7 days a week and this is what makes digital currencies so expensive.
Nor can they function properly if they have any interruptions.
All network connections need latency from other nearby mining pools, making this an expensive endeavor.
These dedicated networks play a role in reducing dependency on external sources and ensuring minimal latency.
Even when the network is offline, transactions are constantly synchronized, a time-consuming process that causes the system to experience errors after the connection is restored.
Correcting these errors is also expensive, as computer engineers have to be hired to do so, which makes bitcoins more expensive and expensive.
Supply and demand
Supply and demand are among the reasons that play a key role in raising the price of Bitcoin and make it expensive.
Anything considered valuable will lose that value if it is produced in unlimited quantities.
There is a good reason why digital bitcoins are so expensive as they are in limited quantities.
It's all about supply and demand.
If the supply of an asset is low, yet there is a high demand for it, the price will almost always grow.
However, if the supply is higher than the demand for that asset, it causes the price to fall.
An example of this is the cost price of gold in the late 1960s was low/
At that time, the demand for gold was lower than it is now, and it cost about $40 an ounce.
Today, demand is much higher and supply remains the same, so the price has risen as high as $1,975.
Bitcoin bid is set at $21 million.
There will never be an amount greater than that.
It is neither extracted nor increased.
The opposite is true.
So supply and demand is one of the main reasons for increasing the price of bitcoin dramatically and making it an expensive currency.
Transaction fees
Another factor that makes bitcoin so expensive is to validate a transaction with this type of crypto or digital currency, a person has to pay huge transaction fees.
The fee amount is measured by the average fee in US dollars when a cryptocurrency transaction is processed and confirmed by a bitcoin miner.
These fees can rise when trading on crowded cryptocurrency exchanges.
This happened in 2017 when the cryptocurrency was booming and fees reached nearly $60 per transaction.
The transaction fee for bitcoin is currently 2,141, which is up from 1,575 and down from 7,365 a year ago.
This means a change of approximately 35.93% from yesterday's numbers and -70.94% from the 2021 figures.