The more people use a type of money, the more useful it becomes. This is referred to as the network effect, and holds true for any communication network. As bitcoin is increasingly used as money, its demand will also increase. Given that the supply of bitcoin is fixed, the price of bitcoin increases proportionately to the increase in demand.

The structural regulation of bitcoin’s supply curve is unique, and enables the price of bitcoin to fluctuate closely with changes in the demand curve. Once the long-term fixed cap of 21 million bitcoin is reached, the price of bitcoin will effectively move only in response to changes in demand. A caveat is that users can lose access to their bitcoin, so there will likely come a time when the available supply of bitcoin contracts and such contractions may be unpredictable or even unknowable.