Bitcoin supply drops sharply next year, price may rise to $3,500

     Sina Technology News: Reuters reported today that the price of Bitcoin will continue to rise in 2016 and break the historical high of $1,100 set in 2013, reaching $4,400 by the end of 2017.

The article points out that the factor that drove the rise in Bitcoin prices in 2016 was not the drug trade on the online black market or the Russian Ponzi scheme, but the slowdown in the growth of Bitcoin supply.

Bitcoin is an Internet-based encrypted digital currency that can quickly and anonymously transfer funds without being regulated by a central bank. Although Bitcoin is seen as the digital currency of the future, some people do not consider it a currency because of its extremely unstable value.

But the factors that led to the rise in Bitcoin prices in 2016 are largely the same as the factors that cause fluctuations in the prices of traditional fiat currencies: supply and demand.

Bitcoin is not controlled by a central bank, but relies on so-called "mining" computers. In the Bitcoin world, a data block is recorded on the public ledger approximately every ten minutes, and this data block contains the transactions verified globally within these ten minutes. The person who grabs the right to record (the first person to successfully verify the transaction) is allowed to add an amount to his account, the current amount is 25 Bitcoins.

To prevent inflation, the Bitcoin reward is halved every four years. Currently, 25 Bitcoins are generated every 10 minutes, but in July 2016, the reward will be halved. Bitcoin was designed to mimic a commodity, with a total supply of 21 million, which can be "mined" in about 125 years, around 2140.

Global Advisors claims to be the world's first regulated bitcoin hedge fund. Its co-founder Daniel Masters has 30 years of experience in oil trading. Masters predicts that the price of bitcoin will break the record high of $1,100 set in 2013 in 2016 and reach $4,400 by the end of 2017.

Masters said there are a variety of factors that will drive bitcoin prices to continue to rise in 2016, including more and more large companies and regulators supporting bitcoin payments, bitcoin's underlying technology "blockchain" attracting more and more interest and investment, and more demand from the Chinese market.

Of course, the main reason is that the Bitcoin reward is halved every four years, and this date will arrive in July next year. Masters predicts that this factor alone may drive the price of Bitcoin up by 50%.

The price of Bitcoin has nearly doubled in the past three months, reaching $500 last month, and there are reports that the recent rise in Bitcoin prices may be due to the rise of Russian Ponzi schemes in China.

Bobby Lee, CEO of BTCC (formerly known as Bitcoin China), the world's longest-running bitcoin exchange, believes that bitcoin prices still have room to rise and are expected to reach as high as $3,500 by next summer.

Li Qiyuan said: "The current value of Bitcoin is equivalent to $1 per capita in the world, which is about $6.5 billion. For such an innovative product, the value of digital assets that are not centrally regulated is obviously underestimated. Of course, it will take time for people to realize this."

Bitcoin rewards are cut in half every four years. The last time the reward was cut was in November 2012, when it was reduced from 50 bitcoins to 25. Jeremy Millar, partner of British financial technology company Magister Advisors, said: "Cutting in half every four years seriously affects the supply, so its price is under great upward pressure." (Li Ming)