Why Are Bitcoins So Expensive? (11 Reasons Why)

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Oberon Copeland

Oberon Copeland is a graduate of Southern Illinois University Carbondale, with a degree in economics and HR.

From a volatile market to extreme highs, bitcoin is making an impression like very things have before. It’s only been around for a few years and yet it’s incredibly intriguing.

Bitcoin has a reputation for being extremely expensive. There are several different reasons for the high prices, which we will uncover for you below.

Why Are Bitcoins So Expensive?


1. Supply Is Limited

Here’s the thing. Bitcoin is not some endless asset that never runs out. It’s a matter of supply and demand. Bitcoin specifically has a limit of 21 million bitcoin on the market.

It will never exceed this amount. Because of that limitation, it’s limited in terms of supply. This makes it almost a collectible by its very nature.

If there is no bitcoin available, you are simply out of luck. People who want some have to wait for availability and then be able to afford to jump in at the moment.

Ownership depends on supply availability. When it’s gone it’s gone, and that drives up the overall cost.

2. Everyone Is An Expert

Have you noticed that everyone is a bitcoin expert in some way? Whether they own any or not, they seem to know everything about it.

How many true experts are out there? It can be hard to determine who is a real expert and who isn’t.

However, the fact that everyone seems to be an expert, leads to a higher demand for a limited supply of product. Everyone wants a piece of the pie.

We can’t all be experts. This is still fairly new and unless you’ve done extensive research and trading, expertise is probably limited.

3. No Copies On The Market

When it comes to things like cash, people can create counterfeits far too easily. That’s not the case with bitcoin.

Since this is a purely digital asset, it is impossible to copy. The creators uniquely crafted Bitcoin with blockchain ledger tracking that makes it impossible to copy.

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That ledger system tracks every single transaction and accounts for every last bitcoin constantly. This is not something that can be counterfeited.

The system was trained by the creator and it is a smart system.

4. Scarcity

Bitcoin is so expensive for the same reason that diamonds are expensive. The thing is these assets are scarce.

To prevent an outage, they prop up the costs of the product. It’s much the same with diamonds.

Bitcoin is considered a rarity. That means that you have to be able to pay to play. It’s nothing personal but rather based on supply and demand overall.

Bitcoin can’t be mined from the caves to gather more. It has a set supply, making it scarce. Remember that when it’s gone it’s gone.

5. Unique Regulation Or Lack Thereof

From country to country, the different currency is always regulated. Every physical currency faces government-related regulations.

This is because those forms of currency are supplied by the government and controlled there as well.

Bitcoin isn’t. It is unique in this capacity. Bitcoin is not controlled by a government establishment. This frees it from compliance with government regulations.

It still has to be valid and monitored but it’s not ruled by the government, giving bitcoin and holders some semblance of additional freedom.

6. Unmatched By Competition

Unmatched By Competition

Bitcoin is ultimately just a brand name when you think about it. It was perhaps one of the first popular cryptocurrencies.

Since its creation, other cryptocurrencies have also been developed. Bitcoin does not envelop all cryptocurrencies and that is a common misconception.

With that in mind, bitcoin has competitors in the market. Many competitors are far more affordable, while some are on the same budget levels.

The market price for bitcoin is in part determined by the competition. However, you will find it remains the top choice despite the competition.

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7. Production Costs

It might seem like creating and distributing bitcoin shouldn’t be overly expensive but let’s break it down.

You see, this is a purely digital mainframe. There are certain security needs and requirements. There are most definitely technological requirements.

Digital operations at times cost far more to operate. In this case, you’re looking at the cost of production through digital platforms but also for the blockchain, security, and continuity.

These things are not cheap. If the blockchain fails or security fails, this could create major issues. To secure bitcoin, costs go into the technical systems.

This directly affects the costs of bitcoin in the end.

8. Electricity Needs

Bitcoin is mined by special processors. This is one of the reasons that the technology industry experienced such a hefty shortage of processors in recent years.

For mining to occur, there must be a high load of processors with high capabilities. Those processors have requirements for operation.

The systems are set up almost like a mainframe. They are the mainframe. It’s not just one or two processors but instead a whole slew of them working together.

The processes are constantly in operation, requiring extensive electricity. On top of the electricity for operation, you also have cooling and running needs to cover for them.

9. Paying The Miners

While mining is primarily done by machines, it’s also managed by people. Yes, it’s digital but it still needs people to keep it in line.

Miners have a lot of work to do and they deserve a reward. This includes paying them for the work but also paying them bonuses.

People have to get paid with bitcoin mining, just like employees at big corporations get paid. This is a factor that is going to drive costs.

Miner’s charge fees and they often get additional incentives as well. They do have a big job, which means they charge hefty fees.

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10. It’s In Our Minds

Since bitcoin is such a hot commodity, it seems easy for the company to charge expensive prices for their product.

Think of it as a luxury product. You can compare it to purchasing designer clothing and purses or a luxury vehicle. You pay a premium to do so, right?

It’s a similar concept with bitcoin. It’s a luxury item, leading people to believe it is worth the expense. If people will pay those prices, the expenses will stay high, or continue to rise.

In essence, the value of bitcoin is going to continue to increase. This causes people to see the value and be willing to spend the money to get in.

11. Limited Use Capacity

Bitcoin is also expensive because it’s limited in use. While there is an increasing trend to purchase bitcoin, you can’t use it just anywhere.

You can’t just run to the store and use your bitcoin for the transaction. Systems are not set up to accommodate this in most places.

While there are some platforms out there that allow bitcoin transactions, it’s not the norm. This drives the price because it’s harder to use and circulate.

To learn more, you can also read our posts on why Coinbase fees are so high, why Venmo is declining your payment, and why your Visa gift card is being declined.

Conclusion

Bitcoin is what you might call a hot commodity. It’s new and exciting and many people want to experience the thrill of owning some.

This leads to higher costs and a challenge to get your hands on the limited supply. These factors are the reason it is so expensive to buy.

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