Bitcoin and Its Reliance on Hype | Exploring Markets

Bitcoin and Its Reliance on Hype

Bitcoin is heavily dependent on hype. For the last few months hype has been the sole driver behind its incredible run up in price.

Here is interest in Bitcoin via Google Trends. Please note the most recent spike that started in 2013, and more importantly the top related search term:

Now here is Bitcoin price. Notice how price starts to rise in late January and February of 2013:

Finally, here is the supply of Bitcoin over time. This is fixed and set supply based on the code behind the creation of Bitcoin:

Economics 101 teaches us that if Supply grows faster than Demand price will fall.

We know were Bitcoin supply will be over the next 20 years (chart above). The question now is: where will the hype be?

If Bitcoin hype, by way of media coverage and social networks, fades into the abyss so will the the  price. However, if Bitcoin publicity continues to grow by way of media and pop culture coverage, that alone should stimulate enough interest and thus demand to keep the price rising and meet its supply curve.