CryptocurrencyInvestingBanksReal Estate

Here’s Why Bitcoin Prices Are Skyrocketing

June 13, 2016, 5:05 PM UTC
Utah Software Engineer Mints Physical Bitcoins
SALT LAKE CITY, UT - APRIL 26: A pile of Bitcoins are shown here after Software engineer Mike Caldwell minted them in his shop on April 26, 2013 in Sandy, Utah. Bitcoin is an experimental digital currency used over the Internet that is gaining in popularity worldwide. (Photo by George Frey/Getty Images)
Photograph by George Frey/Getty Images

These are heady days for owners of bitcoin.

The virtual currency has been surging of late, with the price of one bitcoin rising close to 23% since Saturday afternoon, from $584 per coin to as high as $718 as of late Monday morning.

Bitcoin has been no stranger to whipsawing prices, but there is a concrete reason for the price surge this time around, and that is the fact that the reward bitcoin miners receive for creating new bitcoins is set to be cut in half sometime next month, according to a report in Bloomberg.

The halving of payments to miners is part of the automatic process by which the bitcoin algorithm slowly reduces the number of new bitcoins that will be created, with the total number of new bitcoins ultimately being capped at 21 million.




The price increase is therefore the result of the market anticipating that the supply of bitcoins will soon slow fairly dramatically. “The halving of the supply of Bitcoin is attracting many retail investors,”Jack C. Liu, chief strategy officer at OKCoin told Bloomberg. “More broadly, we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset.”