Bitcoin has sparked much debate about its intrinsic value. I seem to have these discussions frequently and I would like to address the most frequent beliefs about crypto and Bitcoin.
Some argue that Bitcoin has no real value, while others believe it has great value. What do I say in this discussion. Does it really hold value?
Bitcoin is valuable because it is a decentralized currency. This means that it is not controlled by any government or financial institution and its value is determined solely by supply and demand. In a world where central banks can manipulate fiat currencies, Bitcoin’s decentralized nature makes it a worthy alternative.
Bitcoin is valuable because of its scarcity. There are only 21 million Bitcoins, and this rarity is similar to precious metals such as gold. The more people accept bitcoin, the more its scarcity becomes apparent and its value increases.
Bitcoin is valuable because of its utility. It can be used to purchase goods and services, and can also be used as a store of value. This means that people can hold onto Bitcoin and watch its value rise over time, just like investing in stocks or other assets.
Bitcoin is valuable because of its security. The Bitcoin network is based on blockchain technology and is highly secure and difficult to hack. This makes Bitcoin a safe and reliable way to transfer value, adding to its value proposition. After all, Bitcoin is valuable because it is a global currency. Unlike fiat currencies, which are tied to a specific country, Bitcoin can be used anywhere in the world. This is an attractive option for frequent travelers and those doing business internationally.
In fact Bitcoin hold value for similar reasons as fiat currency. Belief!
Like fiat currency, Bitcoin’s value is based on belief and trust in the system. Fiat currency is backed by government commitments to recognize it as legal tender and to regulate its supply and demand. Basically, it’s about belief in politicians and the governmental and financial system. Similarly, Bitcoin’s value is based on belief, but on the belief of a decentralized system that it will continue to be widely adopted and will continue to function well.
But crypto is super volatile! Right?
Like fiat currencies, Bitcoin’s value is also influenced by market forces such as supply and demand, geopolitical events, and investor sentiment. Due to these factors, both fiat currency and Bitcoin experience fluctuations in value. But yes, crypto may be seen as a higher risk than stocks depending on what you invest in. Yet, Bitcoin is the highest performing asset of all 2023 according to JP Morgan. Infact, the highest performing asset the last 12 years.
So there we have clear reasons why Bitcoin has inherent value. Its decentralization, scarcity, availability, security, and global nature all contribute to its value proposition.
We all have different tolarance of risk and volatility is in the eyes of the beholder.