Why Is Bitcoin So Expensive?

The question “Why is Bitcoin so Expensive?” has been around for many years now and it seems to come back every time Bitcoin moves higher. Good times when Bitcoin trades in a bear market are for those who dare to purchase this asset even if everyone thinks it’s moving to zero. Then, when the market skyrockets, this question appears once again.

So why is Bitcoin so expensive? This is the main question that we will answer in this article. We will also discuss other issues that could be associated with Bitcoin’s price and its value and that could affect the way in which the largest cryptocurrency in the market works. 

Is Bitcoin Expensive?

The question of why si Bitcoin so expensive (or not) is relative. It might be very expensive to some people but cheaper to others. But we need to understand the reasons that people have to value Bitcoin and assign a price to it. 

At the time of writing this article, Bitcoin is being traded above $27,500. However, in the last year, Bitcoin was worth $69,000 at the highest point. That means that from November 2021 until today, there have been different prices for Bitcoin. Some people considered Bitcoin at $69,000 cheap (thinking it could move to $250,000), while others considered Bitcoin expensive. 

Let’s ask this question: why is Bitcoin so expensive at $69,000?

At $69,000 Bitcoin was expensive for different reasons. Perhaps the first one is that it was the first time that Bitcoin was traded so high in USD terms. Indeed, Bitcoin hit a new all-time high the day it reached $69,000. Of course, Bitcoin then corrected and it started to move lower, but many investors considered that the price of Bitcoin could continue moving higher.

Secondly, Bitcoin was traded very closely with traditional financial markets. At that time, the FED changed its point of view on inflation when it saw that prices started to move higher after massive printing to go out from COIVD-19. 

The market anticipated the move of high inflation and purchased Bitcoin in advance. But when the FED changed its point of view on inflation (start raising rates), there was a strong outflow of funds from risk assets to other more stable options. Bitcoin is considered a risk asset, and therefore, it entered a bull market in November 2021. 

With the FED changing its narrative about inflation and rate hikes and Bitcoin hitting new all-time highs, it was quite expensive. 

Let’s now ask another question: why is Bitcoin cheap at $69,000? 

Those that considered Bitcoin cheap at $69,000 are perhaps those that were thinking about Bitcoin for the long term. That is all the investors that considered that Bitcoin could skyrocket to $250,000 or something similar. 

For these investors, Bitcoin was cheap at $69,000. Hence, there is no way to clearly assign a price to Bitcoin and say “it’s expensive” or “it’s cheap.” At the end of the day, if the market considers that $69,000 was a fair price at that time, then we could say that it was not expensive. But again, this is a subjective matter. 

Why is Bitcoin so expensive?

So why is Bitcoin so expensive? Well, Bitcoin is expensive if we compare it to other assets. Bitcoin has a price that has not been below $25,000 since December 2020. If we think about Bitcoin being traded below $3,100, then we need to go back to September 2017. Hence, Bitcoin has been traded above $3,000 for many years now and its price continues to move higher in every single market cycle. 

For a normal person working in any developing world country (any country outside the G7), it would be quite difficult to get access to a full Bitcoin. With salaries that range between $200 and $1,500 monthly, it becomes very difficult for a person to get access to a full Bitcoin. Therefore, we can say that Bitcoin is expensive if we compare it with the average salary in these countries. 

But let’s understand why Bitcoin’s price is so high. When Satoshi Nakamoto created Bitcoin, he decided to set a supply limit of 21 million. There are only 21 million BTC that would ever be mined. That makes it extremely difficult for everyone that wants to have 1 BTC to do so without paying a fair price. 

Over the last few years, Bitcoin has become an asset that has been purchased not only by retail investors but also by large companies and corporations. That means that demand for a limited supply is pushing prices higher. One of the answers to why is Bitcoin so expensive is related to its limited supply and the large demand that there has been for this virtual currency. 

Another thing that we should mention is that when the supply is limited and demand fluctuates, price becomes the way to regulate the interactions between buyers and sellers. Therefore, we see that when there is a large demand for Bitcoin but not enough BTC to meet this demand, then the price of the virtual currency surges as it happened when it hit $69,000. 

Now, if the price starts falling due to the lack of demand for the asset at certain prices, it would eventually find a balance and new investors would enter the market at lower prices. 

When Was Bitcoin Most Expensive?

Bitcoin moves in different cycles. Each cycle has a bull run, a top, followed by a bear market and a low price. The cycle repeats every few years, and each new cycle sees new highs for the virtual currency. For example, in December 2017, Bitcoin reached an all-time high of almost $20,000 in some crypto exchanges. 

This all-time high at that time came after several months in which Bitcoin’s price was regularly moving higher and breaking previous all-time highs on a regular basis. During the last part of the cycle, the trend became parabolic and in just days, Bitcoin more than doubled in price. 

After reaching the top in December 2017, a new bear market started. This bear market is not easy to capture at the beginning. Investors still think they are in a bull market and that BTC will recover. However, this did not happen and the market did not recover in the short term. 

A year later, in December 2019, Bitcoin was hitting the lowest point in years after being traded at close to $3,120 on some exchanges. This was the bottom. But again, it becomes quite difficult to time tops and bottoms when they actually happen. We know that after the fact happens and when the trend starts a reversal. 

Then, Bitcoin started a new bull market, similar to the one that BTC experienced before 2017. Indeed, the virtual currency started a new bull trend that pushed its price towards $69,000 in 2021, November. This was a process that required many years of a market that was traded sideways. It is usually not easy to guess the exact point at which Bitcoin or other virtual currencies would hit a top and a bottom. 

Bitcoin Price The Most Expensive: Whi is Bitcoin so Expensive? Bitcoin at $69,000 Chart

Since November 2021, we have been in a bear trend. Now the question is: do we know when the bottom will be? We don’t know. We only know that there is a possibility to hit a bottom in the coming months. How low would this price be, we don’t know until it happens and the trend changes direction. So, if you want to know why is Bitcoin so expensive, then you might find it interesting to analyze the cycles. Perhaps the price is so high because we could be close to the top. 

Why is Bitcoin Expensive to Send?

Another topic to discuss besides the question of “Why is Bitcoin so expensive?” is related to why sending Bitcoin costs. This brings us to how Bitcoin behaves and its technical aspects. Bitcoin relies on something called blockchain technology. This is a chain of blocks that contain information about each of the transactions that are processed on the network. 

Every close to ten minutes on average, a new block with close to 1MB of transactions is processed. When we send a BTC transaction, this is information that is being transmitted through the Bitcoin blockchain. Each transaction takes space from each of the blocks. 

As we said, there is 1 block every ten minutes on average filled with transactions. The price to send a transaction ranges from 1 satoshi per byte to over 250 satoshis per byte. Therefore, a transaction on the Bitcoin blockchain ranges from a few cents to several dozens of dollars. 

Why is Bitcoin so Expensive to send? Mempool and Blocks

But why pay a higher price to send a transaction if I can pay less? This is where miners come into play. The reason you have to pay higher fees is that there is a limit on the transactions that can be added to a block. Miners would prioritize those transactions that pay the highest fees. 

If you don’t pay enough in fees, your transaction might get stuck or take several days to be processed. Therefore, people and investors are competing for block space when they pay fees. Those participants that value their transactions being processed and added in the next block can pay a higher fee. 

Otherwise, it would be a good idea for small transfers to start using the Lightning Network (LN), which makes it easier for users to process small and micro-payments without relying on Bitcoin’s main chain. 

Can Bitcoin Increase in Value?

Yes. Bitcoin can increase in value. This is something that happens every single day. When you see the chart of Bitcoin, there are periods in which the price moves higher and other periods when Bitcoin price moves lower. 

If you are a speculator and you want to buy and sell Bitcoin, you want to make sure you buy and sell at the right moment. There are several moments in which you could easily make a profit if you bought Bitcoin at the right moment and if you decide to sell it later. However, this involves risk, as you might have purchased Bitcoin at, for example, $69,000 and waited many years for its price to surpass its all-time high. 

Bitcoin can increase in value over time and surpass its previous all-time high of $69,000 in the future. Do we know if this will happen for sure? No, we cannot predict the future. But if we take into consideration what happened in the past, then we would expect a similar situation to take place in the future. 

Disclaimer: We are not financial advisors and all the information shared in this article should be considered for educational purposes only. Past performance does not guarantee future returns. 

You could do your own research and try to understand why you consider that Bitcoin could increase in value. Do you believe inflation could skyrocket and push society to hyperinflation? If that happens, then we could see Bitcoin skyrocketing in nominal terms. It is not the same $20,000 in 2017 as $20,000 in 2022 or 2023. 

Who Made Most from Bitcoin?

In this guide, we focused on the answer to “Why is Bitcoin so expensive?”, but we are also trying to understand how these price fluctuations have affected investors in the cryptocurrency industry. 

Bitcoin was released to the market in 2009 by Satoshi Nakamoto. At that time, it was possible to mine Bitcoin using CPU power from a normal computer. However, things changed over the years. It was then necessary to use GPUs. Nowadays, only powerful and expensive ASIC miners are required to mine Bitcoin. 

Therefore, those investors and early adopters that believed in Bitcoin from the beginning are those that made the most from Bitcoin (as long as they did not sell their BTC). At the same time, those companies and investors that build solutions and services during bear markets are those that benefit the most during bull trends.

Investing during bear trends and taking profits during bull runs is a good way to think about Bitcoin investments. Nevertheless, you should always do your own research, as all the information presented by UseTheBitcoin and its writers should be considered for educational purposes only. 

Where is the Best Place to Buy Bitcoin?

We are getting to the end of this guide on “Why is Bitcoin so expensive?” But many investors would now like to know: where is the best place to buy Bitcoin? That’s an excellent question that has a very clear answer. 

The easiest way to buy Bitcoin is using a cryptocurrency exchange. These are platforms that let users create an account, deposit funds (fiat currencies) and start buying Bitcoin and other virtual currencies. Generally speaking, cryptocurrency exchanges would let you deposit funds using debit and credit cards, and bank transfers. They might also have other third-party deposit methods. 

We have also created a unique guide at UseTheBitconi where you can read which are the Top 4 Ways to Buy Bitcoin with Cash. This guide will help you get a clear idea of how you can get access to Bitcoin using cash. 

The next time that you ask yourself “Why is Bitcoin so Expensive?” remember that there are many different factors that influence its price and that it would highly depend on many other things.

This news is republished from another source. You can check the original article here

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