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Understanding Bitcoin’s finite supply

There are two key attributes that make Bitcoin the most financially secure asset ever created. The first is its settlement process (the blockchain), the second is that it is finite in supply.

Gold has proven a reliable store of value for over 5,000 years. Yet we do not know how much gold can still be dug up; maybe its been exhausted and maybe there’s still a lot more to be discovered.

Whereas with Bitcoin only 21 Million are to ever be created. Considering that over 5 million have been lost due to human error it is a store of value that is not finite but also meets the criteria to be a currency.

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The reason the cost of a PC has fallen 90% over the past 30 years is that increased demand led to a decrease in the per unit cost. The expense was in the original capital investment from investing in the mines for all the required materials, getting them to the processing plants and then onto manufacturing. After that capital had to be applied in setting up point of sale facilities and marketing. Therefore the original unit cost was high for companies to reach break even point. Yer as demand for PC’s grew the unit cost could come down.

The reverse applies for bitcoins. Due to their finite nature as demand grows the price per bitcoin will appreciate. Early days it was easy to competitively mine bitcoin, whereas today one needs to join a pool and it’s very difficult to make a return above your outlays, as measured in your power bill. So the greater demand for bitcoin will, over time, correlate with a reduction of supply thus causing the price to appreciate. Therefore pontificating about the ‘best or lowest price’ to buy bitcoin can be a frustrating and fruitless endeavor. Regardless of what price you buy bitcoin, make sure you’re doing safely. CoinCompass is releasing all out content for free until 31 July 2019 to help you do just that.

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