For one bitcoin, you may even have to pay more than $50,000, which makes bitcoin even more enjoyable. Even though bitcoin prices keep declining every year, industry investors seem to be always interested in it. Every person who is a cryptocurrency investor invests their money in bitcoin and makes use of profit. Recently, bitcoin experienced an all-time high price of US$69,000, and after that, it started to decline.
Nevertheless, the investors kept investing and trading in bitcoin, showing that bitcoin always leaves a positive impression on its investors. Also, due to the high rate of return, it is never out of the market. Many investors keep on earning money from bitcoin because they purchased this cryptocurrency a few years back when it was nothing compared to today.
The question still stands why investors are investing in bitcoin so much and why it is so valuable. To understand this, we need to pay complete attention to bitcoin as a currency and that cryptocurrencies are valuable in the market. Back in time, the fiat currencies were backed by physically existing commodities that provided them value.
However, after eliminating any physical commodity backing the fiat currencies, people understand that these currencies have value, for example, tech United States dollars. It is not backed by commodities and still has value over a significantly broader system in the society because of the exam and its acceptance. Every person living in the United States and across the globe believes that the dollar has value, and therefore it does.
BTC was released by an anonymous figure named Santoshi Nakamoto, and nowadays, people believe it to have a lot of value in the market. It has the same concept as the United States dollar. It is also not backed by any existing physical commodity but still, people believe it to have value. Apart from this, the cryptocurrency bitcoin has several features, which makes it valuable for people. Important ones are –
- A limited supply of bitcoin, 21 million bitcoins, makes it valuable. When something is limited, its value exists, and it keeps on fluctuating over time. So a limited supply of something implies scarcity which contributes to the value of bitcoin.
- Find something that none can copy; it creates value. The same is the case with bitcoin. It is impossible to create two identical bitcoins with the same serial number, so it is believed to have high value in the market. It is something unique for people, and therefore, people can exchange bitcoins in return for money.
- Being transferable also makes bitcoin valuable because you can exchange it for something else. If you want to buy a commodity nowadays, the commodity holder will be ready to exchange his position for bitcoin. It creates value for bitcoin, and due to market fluctuations, it keeps on increasing and decreasing.
Why does it have value?
The associate professor at Carnegie Mellon University, Bryan Routledge, says that BTC has value in people’s eyes. There is no existing physical proof that bitcoin contains some value for people, and people believe it. There is a conception in the mind of people that bitcoin is going to become something more than what it is today. The belief placed by people in bitcoin to have increased in its value makes it even more precious for them. The increase in the value of bitcoin is like an increase and decrease in the value of gold. You can read more about market responses on a portal like this wealth matrix.
The author of cryptocurrency investing for dummies says that providing value to something is all in the hands and minds of people. We can take the example of a $100 bill. It certainly does not have any value because it’s worth just less than a dollar. However, we believe that imprinting a hundred dollars on a bill is worth $100.
The human assigns value to something, and it is the same thing that we are doing with bitcoin. Like gold, we cannot simply enter a store and start purchasing things in exchange for goods. However, we can purchase gold and keep it to expect a higher price in future. The same is the case with bitcoin. We believe bitcoin has increased its price over time because it has proven so in the past.
