Why do Bitcoins have a value?
Bitcoins have value because it can be exchanged for and used in place of fiat currency, but it maintains a high exchange rate mainly because it is in demand by investors interested in the possibility of returns.
Of course, many other factors affect Bitcoin’s value. Read on to learn more about why Bitcoin has value.
Why traditional currencies have value
Throughout history, many objects have been used to exchange value – shells, pearls, animal skins and gold are well-known examples. In this respect, these items are considered ‘money’. Money does not need to be the printed currency we are all familiar with – all it needs is to act as a store of value, be recognizable as a unit of account and be accepted as a medium of exchange.
So if a good meets these criteria, it is money. But to be successful and long-lasting, it must have:
– Scarcity: it must not be a widely available resource
– Divisibility: Currency should have many denominations
– Acceptance: the intended audience must accept it
– Portability: It must be able to be carried around and replaced.
– Sustainability: Currency should have a long lifespan
– Uniformity: All denominations should be identical and not easily reproducible1.
Value is then assigned by users based on its supply, demand for the currency, how much it is worth to them and how much of a given good or service it can buy.
Why do Bitcoins have a value?
Cryptocurrency displays the same attributes that a fiat currency system does. This is how they meet them:
– Scarcity: When the supply of unpaid coins decreases, demand increases. There will only ever be 21 million bitcoins.
– Divisibility: Bitcoin is much more divisible than fiat currencies. A bitcoin can be broken down into up to eight decimal places, with constituent units called satoshis.
– Acceptance: More and more people are becoming familiar with cryptocurrencies, and citizens in many countries are using them because their financial system is failing them. Businesses are accepting them in greater numbers, and more consumers are using them.2
– Portability: Bitcoin can be used across borders, allowing any consumer with an internet connection to participate in the global economy and have access to financial services.
– Durability: Because it occupies a digital space, a bitcoin can last as long as there is a digital area to store it in.
– Uniformity: Bitcoins cannot be counterfeited and do not have a physical appearance, although there are reproductions of coins representing Bitcoin.
Since Bitcoin has also become accepted as a medium of exchange, stores value and is recognized as a unit of account, it is considered money.
But its exchange rate, the value most commonly associated with the coin, is not so much a factor for the people who use bitcoins in transactions; it is the investors who buy the cryptocurrency in the hope of profits, and traders who buy and sell it to make money from price movements.
Because it is in demand by investors (realistically, they are speculators as they hope for rewards), Bitcoin demands a very high price, as evidenced by the exchange rates it has experienced in the past. At one point, 1 BTC was worth less than $1 – a decade later, the same bitcoin would have been worth more than $66,000.3.
CoinMarketCap
Prices have declined dramatically since November 2020, but this volatility has many hoping for a market rebound – which also affects Bitcoin’s value.
Prices have declined dramatically since November 2020, but this volatility has many hoping for a market rebound – which also affects Bitcoin’s value.
Why do some people think bitcoins are worthless?
Like any asset or thing of value, the price people are willing to pay for Bitcoins is a socially agreed level based on supply and demand – but some are reluctant to accept that value can be assigned to a digital object. Because of this unwillingness to accept that digital objects can hold value in this way, they remain convinced that Bitcoins are worthless. Others who understand the Bitcoin system agree that it is valuable.
Are Bitcoins reasonably valued?
The market price of Bitcoin is highly volatile and subject to large price swings. As a result, the market price at any given time can vary widely from what can be considered a fair value. Yet, over time, oversold markets tend to recover, and overbought markets cool down. It is therefore impossible to say at any given time whether Bitcoins are fairly valued without the benefit of hindsight.
How much does it cost to produce 1 BTC?
The cost of producing one bitcoin depends on the cost of electricity, the difficulty of mining, the block reward and the energy efficiency of the miners. Some sites estimate at around $18,000 per bitcoin.
Like all forms of currency, Bitcoin is given value by its users, supply and demand. As long as it maintains the characteristics associated with money and there is a demand for it, it will remain a medium of exchange, a store of value and another way for investors to speculate, regardless of its monetary value.
Viking offers a
extension for cryptocurrency
. You can find more information about this on our website.
About the Viking
With Viking’s signals, you have a good chance of finding the winners and selling in time. There are many securities. With Viking’s autopilots, price data, tables and stock prices, you can sort out the most interesting ETFs, shares, options, warrants, funds, etc.
Click here to see what Vikingen offers: Detailed comparison – Stock market program for those who want to become even richer (vikingen.se)
