What Gives Bitcoin Value?


June 18, 2018

What Gives Bitcoin Value

Bitcoin was designed as an alternative way of moving money in a digital space. It is not controlled by any authority, it has no material backing to it, so it’s difficult to understand the reason that makes people attribute any worth to cryptocurrencies. Bitcoins are not issued by any central bank or government, so there is no accountability whatsoever.

One cause why Bitcoin might compete with fiat currencies stock markets is its recognized store of value compared to that of fiat money. This cryptocurrency has elements in it that make it comparable to gold. Developers of the core technology designed a protocol to maximize the capacity until it reaches a fixed number of 21 million BTC. That varies substantially from a typical fiat currency which is handled by government authorities who want to minimize inflation, maintain high employment, and accelerate growth throughout investment in capital assets. When economies developed with traditional fiat money show signs of weakness, investors and traders may move some of their assets into Bitcoin.

Cryptocurrency’s unpredictability is driven in huge part by differing perceptions of the implicit value of the cryptocurrency as a store of value and technique of value transfer. A store of value of an asset is determined by how it can be beneficial in the future by way of some predictability. A store of value can easily be maintained or changed for some good or service in the future. A technique of value transfer is similar in principle used to transfer property in the type of assets from one entity to another.

Cryptocurrency market can be unpredictable but it guarantees almost effortless value transfer. Bitcoin’s worth can move based on news events in the same way as with fiat stock markets. From an investing standpoint, there is a big risk/reward factor as cryptocurrency as an asset is relatively new. A positive fact is that there is a huge amount of money invested in digital currencies. The number of believers is growing and companies are signing on to use crypto coins so there’s a reason to remain positive that Bitcoin price will not go back to zero overnight. The cryptocurrency investing market is similar to the share buying and selling market. Due to this, price changes should not become a reason to worry unless the trader is planning to sell their coins the same day.

Bitcoin projected price can be difficult to predict. In January 2015 the price of one Bitcoin was $215 and the current price is $7600. This phenomenal increase in price is far beyond what most experts would have projected at that time, and some of the most optimistic forecasts range around $10,000 and one expert even projected the price of Bitcoin reaching $100,000.

If you are looking for a way to preserve value then precious metals like gold, silver, and platinum may be more beneficial since they have been used for centuries as a medium of exchange. When it comes to investing you should never make rash decisions but weigh the risks and potential payoff and remember that there are no sure things when it comes to digital currency so approach this trading asset at your own risk.