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It's just law of the market. Bitcoin has limited supply (only 21M will ever be "mined" and even less in circulation due to lost wallets) and ever growing demand
by M4v3R 13y ago
It's just law of the market. Bitcoin has limited supply (only 21M will ever be "mined" and even less in circulation due to lost wallets) and ever growing demand. Most recently Chinese got interested in Bitcoin, so the demand grew even more, while the supply stayed the same.
So simply put when there are less people that want to sell than people that want to buy [3], the prices rises.
Also, as other person here suggested, Bitcoin mining difficulty has risen dramatically in past few months [2] thanks to new specialized hardware (ASICs) finally arriving to its buyers. This, while does not affect the price directly, shows that there is much faith put in the system by miners, which in turn encourages people to buy even more.
It's also worth noting that the $400 price is only on MtGox, which is not considered as market leader anymore. What's more, the withdrawals from MtGox are counted in weeks or even months , so it's not a viable trading platform. If you want a reliable Bitcoin price, head over to BitcoinAverage [1] which does what the name implies - averages (and takes volume into consideration) the price over all major exchanges. They even have a button to exclude MtGox price from the calculations, as MtGox is always 10-20% higher than the rest.
As of writing this post, the average price including MtGox is $380.
[1] https://bitcoinaverage.com/ https://bitcoinaverage.com/
[2] http://bitcoin.sipa.be/speed-lin.png http://bitcoin.sipa.be/speed-lin.png (network hashrate now approaching 5 Terahash per second)
[3] http://blockchained.com/depth_mtgox_15d.png http://blockchained.com/depth_mtgox_15d.png (on bottom chart: orange line is sum of all offers from people wanting to sell, green one is for people wanting to buy)
- leokun 13y ago> only 21M will ever be "mined" and even less in circulation due to lost wallets But you can break bitcoins down into smaller increments than just 1. That must be significant in some way.
- hcal 13y agoIt is as significant as dollars breaking down into pennies. It allows for finer control in deals where the currency is the unit of account.
- deanclatworthy 13y agoBut that's where it ends. Correct me if I'm wrong but pennies and cents can't be broken down any further. Bitcoins can be broken down significantly: 1 BTC = 100,000,000 Satoshis 1 BTC = 1000 mBTC (millibitcoin) 1 mBTC = 100,000 Satoshis 1 μBTC (microbitcoin) = 100 Satoshis So if you think of it like this, it can be divided far more than 21million times.
- jafaku 13y agoPennies can and are broken down further all the time. There's a reason the "Money" design pattern exists. http://martinfowler.com/eaaCatalog/money.html http://martinfowler.com/eaaCatalog/money.html Besides, what's your point? If you break down any amount of money in two, each part is worth half what the whole thing was worth. Many people get confused by this, and I honestly don't know why.
- maxerickson 13y agoIt's just more or less pointless to worry about dividing a penny during a transaction. Private parties can certainly agree to prices that are a fraction of a penny (but they instead tend to deal in lots at those price points).
- grey-area 13y agoBut you can break bitcoins down into smaller increments than just 1. That must be significant in some way. Being infinitely divisible is significant in that it renders subdivisions like cents etc meaningless and makes deflation acceptable without causing problems with transactions, but I can't see any significance for the price.