Here’s one chart every Bitcoin investor needs to see

After Bitcoin‘s (BTC -2.84%) dismal performance in 2022, the recent rise in price makes it look like the worst may be over. While Bitcoin’s recent gains certainly feel good after a brutal 2022 that saw its price drop more than 70%, these are only short-term price movements.

It can be difficult not to get caught up in price fluctuations, but investors who can maintain a long-term perspective – and avoid impulsive decisions – are better suited for success with Bitcoin.

If you feel like you might be struggling to keep the big picture in focus, there’s one chart that usually helps me avoid the hysteria of people paying too much attention to Bitcoin’s price movements.

Time to zoom out

Below is a chart of Bitcoin’s price, in the form of annual candlesticks on a logarithmic scale, which is useful here because it is better at showing data that covers a large range of oscillating values.

This makes it perfect for showing Bitcoin’s historical price, which has gone from just a few cents per token to more than $60,000. The day-to-day fluctuations are almost gone in this perspective. Zooming out, one pattern becomes abundantly clear: Bitcoin rewards the long-term investor.

There are down years where the lights are red, but they are just small setbacks in Bitcoin’s rise. For some optimism, note that Bitcoin has never posted two negative years in a row.

A truly limited offer

If past trends continue, Bitcoin looks increasingly likely to climb. And it boils down to a simple but powerful dynamic: supply and demand.

One of Bitcoin’s most important characteristics is its limited access. The code ensures that there will only ever be 21 million bitcoins in circulation. There are currently around 19.25 million in circulation, and the remaining 1.75 million will become available at a decreasing rate until the year 2140, when the last bitcoin will be mined.

Because the rate at which its new tokens enter circulation slows every four years, Bitcoin is considered a deflationary asset. Unlike the US dollar and just about every other fiat currency, Bitcoin investors should benefit from an increase in purchasing power over time.

Its limited supply and the characteristics of a deflationary asset are two of the main reasons why the world’s first cryptocurrency has gone from being worth less than a few pennies to – at one point – reaching an all-time high of nearly $69,000. Even better, but the demand for Bitcoin seems to only increase.

What the numbers show

There’s plenty of data to back up this idea, including some that suggest the latest crypto winter may be thawing. For starters, the number of wallets with a positive balance recently reached an all-time high of more than 45 million.

And the number of transactions and the rate at which new addresses have joined the network are both at levels not seen since Bitcoin was well inside bull market territory in mid-2021.

While this latest data is encouraging in the short term, Bitcoin has had many achievements in recent years that cannot be measured by a specific chart. In its journey to become a more legitimate asset, it is now recognized as legal tender by two countries, several Fortune 500 companies now hold it on their balance sheets, and it has even attracted the attention of the world’s largest asset manager, Black stone. Should trends like these continue, it could lead to even more demand from investors.

For these reasons, I envision Bitcoin’s price continuing to rise. Macroeconomic factors, private sector trends and retail investor patterns suggest that demand will outstrip supply. And when an asset is subject to this phenomenon, it usually means big things for investors.