On April 6, Bitcoin’s value increased by 700% within a year, a figure far exceeding the expectations of many. For many reasons, experts believe that Bitcoin still has great growth potential ahead.
For example, famous investment bank JPMorgan Chase once predicted Bitcoin price could reach $ 146,000, which is nearly 3 times higher than the current price of $ 58,000. More closely, Ark Invest CEO Cathie Wood gave an explanation of how the price at which Bitcoin could rise to more than $ 400,000. In other words, there are too many reasons for investors to trust Bitcoin, and here are a few of the main ones.
1 – Bitcoin is created by blockchain
Blockchain is the recordkeeping system behind decentralized cryptocurrencies like Bitcoin. To understand its importance, you need to know how to exploit it.
As Bitcoin transactions take place, they are grouped into blocks. These blocks are cryptographically secured, namely that all of the data in a block is run through a function, creating a unique data area for that block. Notably, each block’s signature is added to subsequent blocks, allowing them to be linked chronologically. Bitcoin miners then use modern computer systems to decrypt these blocks.
The process is important for two reasons: First, when a Bitcoin miner successfully decrypts the cryptocurrency, they will be rewarded with Bitcoin as compensation, and this is the only way to create this cryptocurrency. Second, by validating blocks and adding them to the blockchain, Bitcoin miners can create a ledger of all past transactions.
Put simply, Bitcoin cannot be controlled by any central authority. Blockchain is not only effective, but also very secure. If someone tries to change the information in an existing block (i.e. create a new Bitcoin), it will change the output of the crypto as well as change the block’s signature. That means the new signature will no longer match the signature integrated for subsequent blocks.
In fact, to successfully hack a Bitcoin blockchain, an individual would need to control at least 51% of the entire computing power source of the computer network. It is almost impossible. Therefore, blockchain is a highly secure and autonomous database and has value in the financial system.
2 – Bitcoin value of the benefit from the limited supply
The supply of Bitcoin is currently capped at 21 million tokens. The reason for this is because for every 210,000 blocks, the reward for mining Bitcoin is cut in half. At the present time, each person will receive 6.25 Bitcoins when adding a block to the blockchain, but eventually that number will drop to 0.
The limited supply is really important for Bitcoin’s long-term value. According to economic theory, supply and value are inversely related. So if the supply increases infinitely, the price falls to zero, which is a problem for cryptocurrencies that have no limit on supply. Conversely, when the supply is limited, the value of an asset increases.
3 – Bitcoin is the most popular cryptocurrency
Undoubtedly Bitcoin is the most popular cryptocurrency on the market today. In fact, the total value of all Bitcoin in circulation today is about $ 1.1 trillion, four times more than Ethereum, the world’s second most popular cryptocurrency unit.
Besides, the utility of Bitcoin is improving significantly. A few major financial technology companies like Square or PayPal now allow consumers to trade Bitcoin on their platforms. Similarly, Mastercard and Visa have also launched cryptocurrency payment cards, for the purpose of buying and selling and transacting with Bitcoin.
All of this indicates that cryptocurrencies are gaining popularity and trust. Bitcoin, of its importance, has many advantages over other cryptocurrencies. In the future, as cryptocurrencies continue to receive recognition from businesses and investors, Bitcoin will surely remain foothold. This will help maintain popularity and drive demand for Bitcoin.
Even so, investors should keep in mind that Bitcoin is a highly volatile asset. In the past, there have been many times this cryptocurrency slipped quickly. For example, from 2017 to 2018, that is, within 1 year, the value of Bitcoin has dropped by 80%. There is no guarantee that the same will not happen in the future.
However, for the risk taker and risk taker Bitcoin would be the right long-term investment.