The supply of bitcoins is capped at 21 million. The number of bitcoins that are released into circulating supply, per block, decreases by 50%, every 210,000 blocks mined. Based on original mining power, this matches a halving schedule of about 4 years. This schedule is subject to change as improvements in technology, and fluctuations in the number of miners in the Bitcoin network evolves.

Regardless of how deliberately the supply of bitcoins (or any other crypto) is set up, it only matters as much as there is a demand to outpace it. For many months, excitement about Bitcoin has caused the demand for bitcoins to significantly outpace the number of bitcoins being added to the circulating supply, this results in the high prices you pay, as investors. If this outpacing of demand cannot be sustained, then prices (and the associated value of your investment) will fall.

Barriers to entry into the cryptocurrency market are extremely low, largely due to minimal legal and regulatory protections and standards, and easy access to the technology used to facilitate crypto. All it takes is someone with an idea and enough knowledge to write a smart contract. This plethora of substitutes for Bitcoin will make it increasingly difficult for demand to outpace supply.

There are two main factors, outside of good old-fashioned speculation, that are helping insulate the demand for bitcoins.

One is the fact that bitcoin is still the easiest cryptocurrency for investors to access, given all the exchanges it’s offered on, and support for its mining community.

Two is the fact that bitcoin is still the base currency of trading pairs for altcoins; bitcoin is still the primary medium of exchange used to purchase other cryptocurrencies. There are no explicit mechanisms in place to protect these two factors and the demand for bitcoin associated with them. This, combined with all the other ever-shifting factors in a primordial market, are why investors should be mindful about what, and how much, they are buying. Be fueled by knowledge, not peer pressure. Hopefully, this will help the markets establish prices that better reflect fundamental value, rather than highly emotional speculations.

Please, check out this complimentary video on supply implications, in the “Bitcoin’s Relative Prowess” series:

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Thanks for reading and watching!