06/01/2022
BTC price and tokenomics
The BTC price is based on supply and demand. However, unlike national currencies, the BTC supply doesn't increase or decrease in response to changing demand. The protocol itself enforces a maximum total supply of 21 million coins.
New BTC enters circulation each time a miner adds a block of transactions to the blockchain. Initially, this block reward was 50 BTC. After every 210,000 blocks — or, roughly, every four years — issuance of this mining reward is automatically cut in half. The most recent Bitcoin halving event, which took place in May 2020, reduced the block reward to 6.25 BTC. These reductions will continue until all 21 million BTC are in circulation at some point around the year 2140.
With the supply known and limited, changes in demand determine the current Bitcoin price. If buying pressure outweighs selling pressure, the price increases. If sellers outnumber buyers, the BTC price falls.
Over Bitcoin's existence, demand for a censorship-resistant, permissionless payment solution has trended upward. So, too, has the Bitcoin price. However, sudden sell-offs create price volatility. This volatility has made BTC very popular with traders. Meanwhile, Bitcoin's finite supply has encouraged a growing number of individuals, corporations and institutions to invest in BTC as a store-of-value asset.
