Most people wonder What Makes Bitcoin Valuable. For one, there’s a truly devoted following for the digital currency. It makes the headlines consistently and motivates numerous investors to consider turning part of their investment portfolio into digital currency. Yet, it does not enjoy any government or entity’s (like a bank) backing. This makes determining where its perceived value comes from somewhat hard.
Economics shows that the values of items are subjective. When people desire items for one reason or the other, they acquire an economic value. Currencies including crypto-currencies and other mediums of exchange like bitcoins serve various crucial economic functions. Therefore, if you want to know what makes bitcoins valuable, read on to discover some of the reasons.
In a nutshell, people trade in and accept bitcoins primarily because they are quite popular and that popularity is progressively rising. They carry out transactions using bitcoins because other traders (and popular ones at that) are trading in and accepting them. There are so many people that accept and recognize bitcoins as a convenient currency for their transactions especially online.
Bitcoin is certainly limited and decentralized. This is the main feature that makes most people use bitcoins. It is a currency that’s quite hard for any government to trace and tax. Additionally, dissimilar to fiat money which is created by central banks, bitcoins have a total cap set on them. This limits the extent to which inflation can devalue the digital currency. Also, since it is not produced by any central bank, it can be mined by just anybody that is up to the task. USI-Tech is an example of such miners. It is a service that mines bitcoins and offers 1-2% returns to participants.
Investment and Equity
This is another big one among what makes bitcoin valuable. Bitcoins function similar to investing in equities. Their market value has taken true wild swings of recent. What’s more, there is even a market cap that’s always in place for the bitcoin market.
There seems to be the emergence of a social network of people that are related to the digital currency. Bitcoin is now something of a social network on its own. The community of particular individuals that deal in bitcoins in one way or the other is now quite active. In fact, the community now functions just like any of the other online social networking platforms. Just Google the keyword and you will certainly be amazed at the number of relevant results the search engine will return for you to sift through.
What Makes Bitcoin Valuable: The Last Reason
The last reason is basic economics (utility, supply, scarcity, and demand). Simply put, the currency is useful but scarce, so it must attain the value to demand a particular price, with every other thing remaining equal. The blend of the elements of utility and scarcity generates real value. And value is what determines a price based on the demand in the market and the quantity that is supplied.
So, there you have it. The answer to what makes bitcoin valuable. Anything that is quite useful but scarce, must certainly have the blend of those two features determining its value which in turn determines its price. Bitcoin is simultaneously scarce and useful, so demand and supply forces must make it valuable and pricey.