Satoshi was correct. The cost to make something determines how much it sells for. Let’s talk about gold and Bitcoin. Both have seen highs and lows in their production costs and prices. When Bitcoin production cuts in half, its production cost suddenly doubles. For instance, if it costs $35,000 to make Bitcoin before, it will cost $70,000 after. But people can still buy Bitcoin on the market for $35,000. So, they’re getting it at a discount.
Because of this, everyone rushes to buy Bitcoin at $35,000. This pushes the price up to $70,000, closing the gap. Unlike gold, Bitcoin’s supply doesn’t increase easily. The value of Bitcoin depends on how much it costs to make, which affects its market price. This happens without considering the fear of missing out (FOMO) and speculation that happens during each cycle. So, Bitcoin’s price will likely keep going up over time.
Satoshi used gold production costs to explain how difficulty adjustment works. This helps us understand Bitcoin’s halving and price increase. So, what makes Bitcoin trend up? It’s the difficulty adjustment. This special formula makes sure miners keep mining Bitcoin, even if the price falls below production cost. As the difficulty decreases, miners can produce more Bitcoin for the same cost. This pushes production costs up and makes the price go up too.
After reading all this, here’s a final question: Why wouldn’t Bitcoin’s fair value keep going up forever? If your answer is “no way,” then it’s a good idea to buy and hold Bitcoin without worrying.