On Christmas Eve 2024, Bitcoin reached a significant milestone: 19.8 million coins have been mined, leaving less than 1.2 million coins remaining until the maximum supply cap of 21 million is reached. This event underscores Bitcoin's unique characteristics, fostering a sense of scarcity and strengthening its long-term value.
Let's examine how the limited supply mechanism and regular halving events influence the market and the future of this cryptocurrency.
Bitcoin: Limited Supply and Halvings
Bitcoin's issuance model is designed to ensure the full supply won't be reached until 2140, with each halving reducing miner rewards by 50%.
Each year, the mining process slows down, and eventually, rewards will become so small that mining new coins will cease altogether. The decline in mining rewards also slows the issuance of new coins, fostering scarcity and supporting demand.
Each halving decreases the total supply available, thus increasing Bitcoin's value as an asset. Initially, miners earned 50 BTC per block, but after the 2024 halving, this reward dropped to 3.25 BTC per block, continuing until 2140.
The Increasing Value of "Pure" Bitcoins
As supply tightens, "pure" Bitcoins—those that have never been used in transactions—are becoming increasingly rare and valuable. With the slowing issuance of new coins, these pristine Bitcoins are gaining recognition. They symbolize scarcity and exclusivity, driving demand among investors.
Coins that have not been transacted are considered "pure" and can only be used through direct peer-to-peer transactions. This uniqueness enhances their market value.
Scarcity's Impact on Bitcoin's Price
Today, Bitcoin is trading at $95,614.67, with a market capitalization exceeding $1.8 trillion. As the total mined supply approaches the 21 million cap, scarcity becomes more pronounced, supporting the growth of Bitcoin's price.
However, in reality, the circulating supply of Bitcoin will always be lower due to lost coins, long-term holdings, and inaccessibility for many users. This scarcity is a key factor driving the increase in Bitcoin's price.
Reduced Volatility and Market Stabilization
Bitcoin is currently experiencing less volatility compared to previous market cycles. In the past, Bitcoin's price fluctuations were marked by sharp swings, but the current market is characterized by more stable movements. For example, after a 32% drop on August 5, 2024, Bitcoin gradually recovered, with pullbacks limited to 25% from local highs.
This price stability can be attributed to several factors, including the introduction of spot Bitcoin ETFs and increasing institutional interest, which provide greater liquidity and price support. Analysts also observe that the market responds less to short-term fluctuations, indicating a maturing cryptocurrency ecosystem.
Bitcoin Ecosystem and New Challenges
Activity within the Bitcoin network, particularly in the Runes project, reveals some interesting trends. The share of transactions in the Runes network has dropped significantly from 50% to 1.67%. This decline may be attributed to reduced price volatility of Bitcoin and a shift in investor interest toward more stable market segments, such as meme coins, NFTs, and Ethereum.
These changes indicate a gradual transition in Bitcoin's ecosystem toward investments that are more stable and less speculative. However, as Bitcoin prices stabilize over longer periods, interest in projects like Runes may be rekindled.
What's Next? Projections for 2025
Bitcoin is expected to continue attracting attention as a store of value, given current trends. Its limited supply and decreasing issuance contribute to its deflationary characteristics, and halving events will play a significant role in maintaining its value.
For long-term investors, Bitcoin presents an appealing asset due to its limited supply and increasing demand. However, short-term traders should be mindful of potential corrections and uncertainties stemming from external factors, such as cryptocurrency regulations and shifting investor priorities.
Conclusion
Bitcoin is evolving into a unique asset characterized by its limited supply. As each block is mined and halving events occur, its scarcity increases, which drives demand and supports its price growth. While challenges such as volatility and competition exist, they only highlight Bitcoin's long-term appeal.
In the years ahead, Bitcoin is likely to remain a significant player in financial markets. For long-term investors, its scarcity and growing value make it an ideal addition to their portfolios.
