Why is Digital Scarcity Important for Bitcoin?
The most important characteristic of cryptocurrencies that differentiates them from traditional money and monetary systems is the fact that Bitcoin is a scarce asset with a predetermined number of BTC, which are being mined at a predictable rate.
This is also one of the reasons why Bitcoin is a successful cryptocurrency with the largest market cap of over $1 trillion in 2021. In this article, we review this characteristic of Bitcoin and how it enhances the value of BTC.
Money Holding Value
The money holding value is an essential feature of every currency, and it doesn’t matter whether it is a digital currency or a traditional currency. The central bank impacts the relationship between the supply and demand of the currency in order to control the inflation rate.
If the currency is unstable and there’s inflation, then the value of money decreases. But when the cryptocurrency has a limited number of tokens that can be generated, then it’s difficult to reproduce or copy it.
One Bitcoin has a limited pool of 21 million BTC, a number which Nakamoto chose, and he did this in order to control the inflation rate because there aren’t monetary, fiscal policies as well as the separate institution that regulates the relationship between the supply and demand of BTC.
Instead, there are protocols designed by Nakamoto, the creator of Bitcoin, that regulate the supply of BTC. For example, halving is one event that is very important to keep the introduction of new BTC at a predictable rate while halving the block reward of the miners. Based on the protocol, the event happens every four years after 210,000 blocks are added to the network.
Furthermore, after this event, the value of Bitcoin keeps increasing due to the declining number of current BTC as the total quantity of new BTC is cut in half. In addition, we have mined 80% of the entire supply.
Bitcoin Safe- Asset Status
Due to the digital scarcity of this cryptocurrency and its ongoing halvings, the value of Bitcoin has significantly increased over the years, particularly during the last halving.
If you want to leverage this position of the price of Bitcoin, you can join a trading site and invest in BTC today. There are many automated trading sites like https://bitqt.io/ that allow you to trade successfully, without significant knowledge in this area.
As a matter of fact, there are detailed instructions and resources to help you learn how to trade on the automated platform. Moreover, the advantage of automated trading systems is that they are able to execute trades at a high-win rate and perform trading without your consistent input.
The safe-haven status of the cryptocurrency was established because not only is this cryptocurrency totally limited, but also its price is based on a relationship of the supply and demand. Similarly, like gold, the total number of BTC remains limited, and the cryptocurrency is independent and functions separately from the political crisis, financial crisis and other imbalances on the global financial market.
Another position that makes this valuable currency is the fact that its price went on a bull run during 2020.
Importance of Institutional Support
The proof that BTC is a well-designed cryptocurrency and its digital scarcity only fuels its value is the fact that crypto in trust funds are huge investors that add BTC to their portfolios. One of the most famous examples is the investment of Elon Musk of 1.5 billion BTC from Tesla, and he also decided for Tesla to become a business that accepts
Bitcoin payments and further supports Bitcoin and other cryptocurrencies. Otherwise, there is great support from renowned brands like PayPal, Etsy, Square, and Microsoft, other big brands. In conclusion, the rise and long-term success of Bitcoin are definitely triggered by its digital scarcity.