TL;DR: Cryptocurrency is a life changing opportunity for many people that get in early and know what they’re doing. It’s happening with BTC and it will happen with other blockchains and tokens as well. 

It’s safe to say the crypto industry is still in its infancy with gigantic room left to grow. Bitcoin crypto tokens might be quite a good investment, but you have to know how to asses the status of the Bitcoin network and its future value.

In this article, we’re gonna learn how to judge the economics of a blockchain such as Bitcoin and draw a conclusion based on it.

Should you buy Bitcoin (BTC)?

With a total predicted market cap of $15 trillion by 2025, crypto investing is clearly on the rise. Over the past few years the crypto industry has maturated from “magic internet money” into fully fledged companies that are on their way to become major financial institutions.

From the 40 year old Bitcoin maxi to the 15 year old who flips JPEGs as a side hustle, putting some money in novel technologies such as cryptocurrencies is now a trending activity for investors of all ages. The new generation didn’t get their shot at investing in the tech giants of today, and crypto is seen as the next big technological revolution.

Why is that you ask? To put it short, traditional assets have reached their explosive peak. Digital assets such as tokens, coins, and NFTs are a new financial instrument that you can use to better diversify your investing portfolio.

Tired of small returns people are shifting their attention to more compelling assets — but that also comes with several downsides. Navigating these downsides and preparing yourself for what to expect when buying tokens is a crucial part of investing. Knowing all the intricacies is not always necessary but some knowledge is required to not blow up your account by investing in crypto.

Bitcoin is a cryptocurrency and as any other cryptocurrency, it’s prone to volatility. After seeing the performance of the Bitcoin chain it’s understandable to ask yourself if BTC is a good buy right now.

Buying its native BTC token is one of the possible ways of making money on Bitcoin, but is it worth it? What does $BTC do and is Bitcoin the future? 

A clear answer to these 2 questions is needed before allocating a part of your portfolio to $BTC.

Bitcoin was invented in 2008 by an unknown group known as Satoshi Nakamoto. The first BTC block was mined in January 3rd, 2009, when it was released as an open-source software. Bitcoin represents the most basic example of a blockchain.

One of the shortcomings of the network is its limited scalability. Bitcoin can only process 7 transactions per second with a block time of 10 minutes. Limited scalability and a fixed supply has led many to believe that BTC is a store of value more than a payment currency. However, the biggest advantage of Bitcoin is undisputed — its censorship resistance.

The Bitcoin network is unarguably the longest and most secure blockchain in existence. To this day, the network was battle tested with governmental crackdown attempts as well as mass media scrutiny. In spite of all the hardships, the Bitcoin network has prevailed and continues to be the #1 cryptocurrency by market cap.

Why does Bitcoin (BTC) have value?

The BTC token is named as “the common unit of account” of the Bitcoin ecosystem.

In simple terms, BTC is the native token for the Bitcoin blockchain. It is used throughout the network for different use cases.

Bitcoin is the network (also called blockchain), and the $BTC token is the fuel that powers it. Every interaction on the Bitcoin network requires users to pay a small fee, called gas fee. The gas fee is paid to miners in exchange for securing the chain.

Having no fees or a fee that is too low opens up the network to attacks and spam transactions. Blockchains work on the premise that attacks should be very expensive. If the fee is cheap attackers can spam transactions and clog the network. This is the case we’ve seen with blockchains such as Solana.

In the instance of Bitcoin, both miners and users interact with its native BTC token. Both of these network members (or “actors”) use $BTC for different purposes. This creates an economic structure that is healthy for the future of the BTC token.

Miners need to spin up mining rigs and consume electricity to confirm transactions and produce new blocks. This electricity is converted into raw processing power needed to produce blocks. In return they receive freshly minted Bitcoin tokens as the block reward.

Such a rule is implemented so that attacking the network becomes very expensive to malicious actors. Take Bitcoin for example, if you wanted to try and include one malicious transaction in just a single block it would cost you upwards of $1 Million in electricity costs. Being stable and immutable at all times are the primary scopes of a blockchain, everything else comes second. 

If a miner tries to include a bad transaction in a block then the rest of the miners will ignore it. A new network will be temporarily created by the malicious miner (called fork) then die soon after, and the miner will be left on its own separate network. This is the rule of PoW blockchains — the longest chain is the valid one — and all mining nodes follow the longest chain.

The longest chain is what individual nodes accept as the valid version of the blockchain. It’s the chain of blocks that took the most effort to build. What effort are we referring to exactly?

In short, to add a new block to the chain you need to use processing power, which means that every block on the blockchain used up energy to get there. As a result, nodes will always adopt the chain that took the most energy to build, which is what we mean when we refer to the “longest chain”. This is Satoshi Nakamoto’s guiding principle that all Proof of Work blockchains follow inside their protocol.

Using the Bitcoin blockchain also requires some BTC, regardless of the type of transaction being sent. Users pay a small fee in BTC to miners for verifying and including their transaction in a block.

Bitcoin’s SHA-256 consensus algorithm requires BTC tokens to be used as a measure for preventing bad behavior, without it users cannot make transactions. With this in mind we can conclude that the main use case of the $BTC token is securing the Bitcoin blockchain. 

Can the usage of the network affect the price of Bitcoin (BTC) tokens? As more people join the network and use tools that are integrated with Bitcoin it impacts the dollar amount that new buyers will have to pay when buying BTC coins. 

If more users join the network, that puts economic pressure on the supply of the $BTC token. A bigger number of people will need to buy BTC tokens — making the price of Bitcoin go up as more people use the chain and the integrations on it. This also has an effect on the actors that confirm the transactions users send to the network. More people means more transactions, and more transactions means more fees. 

This correlation between network usage and the value of the native token is a natural occurrence in Proof of Work blockchains such as Bitcoin. It is also what gives the BTC token its primary monetary value. How high that value can be is detailed in the next sections.

Why is Bitcoin (BTC) going up/down?

Bitcoin, like any other cryptocurrency is volatile by nature. When you see the price suddenly go up or down, it’s normal to ask yourself why that happens. 

The price of a cryptocurrency is influenced by many factors like supply, usage, emission and market sentiment. Due to its tokenomics, new Bitcoin tokens are being released with each block. Because tokens are being released over time this results in selling pressure from miners. 

But that does not mean it can’t go up or down in price based on how much the Bitcoin blockchain is used. Adoption is usually the key metric that influences the price of a token.

A negative event such as China banning Bitcoin mining or mass media FUD deal can have broader implications for investors and result in the token price going down.

Positive events such as the release of SegWit or partnerships such as Lightning Network gives confidence to investors in the long run. Events such as these means more people hear about Bitcoin and may become interested in owning some $BTC.

This brings more users to the Bitcoin ecosystem and usually has a positive impact on the price, making it go up. Other parts of the Bitcoin tokenomics can also influence the price, let’s see what those are.

A portion of a token’s supply is usually locked at launch, with the rest being slowly released in time. This can mean months, years or even decades — so it’s important to know the specific timeline of the chain you’re investing in. Such releases are mentioned in official documents such the Bitcoin whitepaper.

Constant block rewards and miners selling their newly minted tokens can put selling pressure on the token. This can make $BTC — the fuel of the Bitcoin chain — go down in price temporarily. 

However, as long as usage continues to grow that shouldn’t have too much of an impact in the long-term. The price of a coin is a complex number that stands on top of many pillars that are constantly changing. 

Blockchains are resilient by design and have a couple of measures implemented at the protocol level to combat possible issues. This ensures the Bitcoin network can still function or in the worst case come back online at a later time, unaffected. Unless a catastrophic event occurs it’s impossible to pinpoint the price movement to one single cause.

Can BTC reach $100,000 per token?

Buying and hodling BTC — the native token of the Bitcoin chain — is one way of potentially making money on Bitcoin.

By looking at its current price, it’s natural to think about the chance of BTC hitting $100,000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.

Let’s examine the potential growth of the BTC token by analyzing its tokenomics. Bitcoin’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} Bitcoin tokens being in circulation today, that means a price of {PRICE} per BTC.

How did we come to that calculation? It’s quite easy, the price of a Bitcoin token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each BTC coin. 

By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of Bitcoin at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for Bitcoin to hit that price.

At a price of $100,000 per token, that means the current market cap of Bitcoin would equal ${{CIRCULATING_SUPPLY} * 100000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $100,000.

Now let’s shift our attention to the fully diluted market cap.

Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.

The fully diluted market cap represents the total value of a coin if all tokens were in circulation. Bitcoin’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} BTC which means that no more coins above that number will ever be created.

These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.

How does this impact the price of Bitcoin? Taking into account the current price of a BTC token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. BTC coins that have been burned are not taken into consideration because they have been permanently removed from circulation.

Whether it seems gigantic or not, the number we came to above only takes into account the current price of a BTC token. Doing the same calculation but with a price of $100,000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 100000} for the Bitcoin network fully diluted market cap.

These are all crucial details to know when calculating if Bitcoin can reach the price of $100 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.

The future of Bitcoin depends solely on its growth as a network used by tens and hundreds of millions of users.

If you’re looking to add some Bitcoin (BTC) to your portfolio, the most trusted places to get some are Binance and Coinbase.

Can BTC reach $1,000,000 per token?

Let’s get to bigger feats now, a price of $1,000,000 per BTC token. If $100,000 got your attention, a million bucks for a single token definitely made you interested about buying some, but is that even possible?

As noted before, we should refer to the total market cap when thinking about the possibility of Bitcoin reaching a certain price. The fully diluted capitalization formula is a simple and fast way of assessing the future growth of chains such as Bitcoin (BTC). 

At a price of $1,000,000 per BTC, that results in Bitcoin being worth ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000000}. If that number seems high to you, well.. that’s because it is. Such valuation would make the entire Bitcoin chain one of the most valuable networks in the world.

While usually reliable, the fully diluted marketcap formula has one small caveat that usually gets overlooked. This small detail might make all the difference in the world when thinking about investing in Bitcoin.

The issue with such a simple calculation is that it doesn’t take into account the specifics of each chain. We are not talking about the features of the underlying technology, but rather the future events that might impact it. If the fully diluted market cap is too high it increases the efforts needed for the network to sustain such a price. 

Outliers have been observed, and it’s definitely possible for a cryptocurrency to reach a mind boggling capitalization. The most clear examples of that are giants such as Ethereum. 

Being the most valuable asset in the world, it have already broken the monetary barriers that a blockchain network can reach. But how did it do it? The answer is pretty simple, but doing it is quite the opposite.

The future growth of the token price is usually tied to the growth of the underlying chain that it powers. Constant updates, sustained development and users joining the platform are notable factors to take into account. 

If the founding team continue to deploy updates that make Bitcoin competitive it will result in numerous interested developers building on it. Developers will be incentivized to build revolutionary integrations on Bitcoin and amass new participants to the network.

Whether sooner or later, this will be clearly reflected in the BTC price. Users will come in and put buying pressure on the BTC token, raising the price in return.

So, while a price of $1,000,000 is theoretically possible — and maybe even more than that — the future growth depends on relevant updates that increase the actual usage of the Bitcoin chain.

What a network does and the way it grows directly affects your investment in it. It is rare that you can buy a coin and then forget about it for months or years. 

If staying up to date with the events in the Bitcoin ecosystem is important to you then make sure to follow the latest $BTC news that come out.

Is Bitcoin (BTC) dead?

If the price of a coin has stagnated for a long time, it’s healthy to ask yourself if the project has indeed died. Price, however, is not the only factor that should lead you to this assessment. 

There are many other parts in the lifecycle of a blockchain that have to function properly for it to keep growing. Another important factor is the activity of the Bitcoin development team.

If the development team, or Bitcoin developers in general, have signaled the abandonment of the network that’s a bad sign for the Bitcoin ecosystem. Lower development activity on the Bitcoin network means fewer tools and integrations being built.

A blockchain such as Bitcoin gets its users from the number of integrations and updates released for it. They’re the primary motive to use a Proof of Work network such as Bitcoin, without tools there’s no incentive to use it.

The fewer tools are available, the less users want to use the Bitcoin blockchain for their transactions. When more integrations get released, new use cases become available and more users join the Bitcoin (BTC) ecosystem. 

Currently, the Bitcoin (BTC) blockchain is thriving both in usage and development activity. This translates into a healthy ecosystem and new participants that join the network periodically. 

With increased usage of the network comes more fees to miners, which are incentivized to spin up more mining rigs and further decentralize the network. This cycle needs to always function smoothly to keep Bitcoin and its ecosystem alive. To asses the current status and future of a network we need to take a look at the latest updates and plans.

The biggest updates on the Bitcoin (BTC) chain are the release of Segwit and Taproot.

More updates are also prepared for Bitcoin, but the development team remains secretive about its roadmap.

You can keep up to date with developments in the Bitcoin ecosystem by following the most recent news that come out. The two main ways to do that is to periodically check all the Bitcoin (BTC) specific web pages, or by following a central news source that posts updates as soon as they happen. 

Even if the network growth starts to stagnate, knowing about it just a bit too late can make your whole investment worthless.