What’s behind the recent price surge?
Here we go again. After a long stretch in which the price of bitcoin held stable, the world’s most famous digital currency is on the move again—and this time it’s heading straight up.
On Tuesday, bitcoin was nosing towards $550 per unit, which is even higher than August 2014, when bitcoin prices reached almost $533. The recent move also ends a six-month period of relative tranquility in which prices mostly hovered between $350 and $450.
It’s also a remarkable improvement from a year ago when the currency was in the gutter. On June 1, 2015, one could buy a bitcoin for $226. To get the flavor the recent uptick, here is a screenshot from Coindesk’s price index, showing prices in the last week: So what’s behind the recent surge? It’s hard to say for certain since the workings of bitcoin are often inscrutable to outsiders, while those who are in the know typically have an agenda to push the price up or down. That said, here are three explanations for the current price jump.
Reason 1: Mining bitcoin is about to get more expensive
Recall that bitcoin is “mined” by people with specialized computers that solve cryptographic puzzles. (This process also serves to provide a record of bitcoin transactions.) In return for solving the puzzle, the miners receive 25 bitcoins.
The nature of bitcoin is deflationary, however, meaning that fewer bitcoins are mined as time goes on. Critically, at some point in the near future, the reward for miners will drop from 25 bitcoins to 12.5 bitcoins. (See this Bitcoin magazine article for more).
It’s unclear how this price cut, which will take place when bitcoin block 420,000 is mined (probably in the coming weeks), will affect the price of in the market. But several news […]
