Why Bitcoin and Cryptocurrencies Are Likely to Rise in the Long Run

Updated on January 24, 2018
Rock_nj profile image

I find cryptocurrencies to be fascinating. I have been following Bitcoin's development closely since 2011, as I saw the big potential of it.

Everybody seems to have an opinion regarding where Bitcoin’s price is heading in the long run. There are the pessimists who say it will eventually become worthless and be worth nothing, while there are optimists that believe the sky is the limit and Bitcoin is heading for the $100,000 mark and beyond. While cryptocurrencies often trade on their own merits, the whole sector is clearly influenced by price movements in Bitcoin, so figuring out where Bitcoin is likely heading can provide some guidance regarding where the whole cryptocurrency sector is heading looking out a couple of decades.

Bitcoin Is Likely to Rise in the Long Run

While there will be bumps along the way, fundamental factors indicate Bitcoin should rise in the long run.
While there will be bumps along the way, fundamental factors indicate Bitcoin should rise in the long run. | Source

A Basic Law of Economics Provides Insight into Where Bitcoin’s Price Is Heading

The economic law of supply and demand states that a low supply and a high demand for any commodity increases the price of a commodity. This is because plentiful buyers bid up the price as they chase after dwindling supply.

The beauty of the way Bitcoin was designed by its creator (or creators) is that there is not an endless supply of Bitcoin. The way it was set up, the maximum number of Bitcoins that can be created through mining is 21 million. As of this writing, 16.8 million Bitcoins have been created, which is 80% of the total maximum supply. By 2032, 99% of all of Bitcoins are expected to be created, and the total is expected to approach the 100% mark by 2040. By design, the rate of supply of Bitcoins drops off as it nears its maximum, so reaching the 21 million maximum will take a number of years, even as it approaches the maximum in 2040.

However, based on supply and demand forces, reaching the actual maximum supply is irrelevant. The anticipated shortage of supply and foreknowledge that eventually Bitcoin will reach its 21 million maximum supply will likely cause Bitcoin’s price to rise substantially in coming decades, as long as demand for the cryptocurrency remains relatively strong. Simply put, new buyers will be chasing fewer freely available Bitcoins, as many are stored away by those that bought before them, and the new buyers' demand for Bitcoins will cause the price to increase, most likely substantially.

There is another factor that should help Bitcoin increase in price over time. While the official maximum supply of Bitcoin is 21 million, the reality is that since its creation in 2009 millions of Bitcoins have been lost forever. Analytical experts that have studied the Bitcoin blockchain estimate that 3 to 4 million Bitcoins have been taken out of circulation forever because they were lost by their owners. That may sound hard to believe, but keep in mind that for many years Bitcoin was not worth much, and some owners did not do a good job keeping track of their private keys that prove that they own the cryptocurrency. Once the private key is lost, a Bitcoin is essentially lost and taken out of circulation, because the owner has no way of selling it without the private key that proves ownership to a buyer.

So the actual maximum supply of Bitcoins might wind up closer to 17 million coins, assuming not too many more are lost over the next couple of decades, as owners are expected to be more careful about holding onto their private keys now that Bitcoin has become very valuable.

Bitcoins total supply will max out at 21 million.

Bitcoin and Cryptocurrencies Should Rise in the Long Run

Based on limited supply and expected strong demand, it is reasonable to assume that Bitcoin will rise in price over the long run. The bearish case that postulates that Bitcoin will become worthless over time seems implausible given the limited supply, unless a massive coordinated government crackdown essentially wipes it out. More likely, as the cryptocurrency nears the 99% supply level and then moves towards the 100% maximum supply, it will make a parabolic move higher, as buyers desperately try to buy a stake in the face of dwindling supply. So, the optimist’s $100,000 and beyond Bitcoin target seems much more plausible than it plummeting to zero.

Even though other cryptocurrencies are competitors to Bitcoin, the whole sector appears to benefit when the price of the flagship cryptocurrency Bitcoin increases. Therefore, it is reasonable to assume that broadly the entire cryptocurrency sector will rise in price in tandem with Bitcoin. Of course, individual cryptocurrencies’ prices are governed by their own unique features and developments, so whether they eventually rise or fall in the long run will be based on many factors beyond Bitcoin’s price performance; however, any sustained increase in the price of Bitcoin over the long run should provide a nice tailwind to the entire cryptocurrency sector, at least healthy cryptocurrencies.

Bitcoin Is Just One of Many Cryptocurrencies

Bitcoin stands out among cryptocurrencies because it is the first one, but there are many cryptocurrencies that will likely rise in the long run
Bitcoin stands out among cryptocurrencies because it is the first one, but there are many cryptocurrencies that will likely rise in the long run | Source

Big Money Will Enter the Cryptocurrency Market Soon

One final thing to consider regarding the long-term prospects for Bitcoin and other cryptocurrencies to trade at much higher levels in the future is the fact that big money, for the most part, has not taken part in buying cryptocurrencies yet. Yes, there have been stories about renowned wealthy investors buying Bitcoin and other cryptocurrencies (some of which are quite difficult to buy since they are not available on all trading exchanges). However, the vast majority of mainstream investors have not yet gotten involved in purchasing cryptocurrencies. They are just too exotic, confusing and inaccessible for many investors.

Part of the reason for their non-involvement, beyond mistrust of digital currencies, is a lack of access to buy cryptocurrencies. Mainstream investors, large and small, cannot buy and sell cryptocurrencies using their stock brokerage accounts. However, that will change over time, as Goldman Sachs is expected to open a cryptocurrency trading desk during 2018, and many other brokerage houses will likely follow with their cryptocurrency desks that allow their clients to buy cryptocurrencies.

Mainstream investors and big money having easy access to buying cryptocurrencies mean digital currencies are likely to rise in the future, as the demand side of the equation increases as they become accepted by the mainstream investing community. This new financial sector is in the early part of the game.

Goldman Sachs Is Expected To Open a Cryptocurrency Trading Desk

Goldman Sachs will open a Cryptocurrency trading desk during the summer of 2018, according to published reports
Goldman Sachs will open a Cryptocurrency trading desk during the summer of 2018, according to published reports | Source

The Long-Term Outlook for Cryptocurrencies Poll

Where Do You See Cryptocurrencies Heading In Coming Decades?

See results

What happens after the 21 millionth Bitcoin?

Questions & Answers

    © 2018 John Coviello

    Comments

      0 of 8192 characters used
      Post Comment

      No comments yet.

      working

      This website uses cookies

      As a user in the EEA, your approval is needed on a few things. To provide a better website experience, toughnickel.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

      For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://toughnickel.com/privacy-policy#gdpr

      Show Details
      Necessary
      HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
      LoginThis is necessary to sign in to the HubPages Service.
      Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
      AkismetThis is used to detect comment spam. (Privacy Policy)
      HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
      HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
      Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
      CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
      Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
      Features
      Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
      Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
      Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
      Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
      Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
      VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
      PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
      Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
      MavenThis supports the Maven widget and search functionality. (Privacy Policy)
      Marketing
      Google AdSenseThis is an ad network. (Privacy Policy)
      Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
      Index ExchangeThis is an ad network. (Privacy Policy)
      SovrnThis is an ad network. (Privacy Policy)
      Facebook AdsThis is an ad network. (Privacy Policy)
      Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
      AppNexusThis is an ad network. (Privacy Policy)
      OpenxThis is an ad network. (Privacy Policy)
      Rubicon ProjectThis is an ad network. (Privacy Policy)
      TripleLiftThis is an ad network. (Privacy Policy)
      Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
      Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
      Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
      Statistics
      Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
      ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
      Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)