What Gives Bitcoin It's Value?

Bitcoin can certainly be considered as a currency but now with heavy investments, it is also a serious asset that people own. It is an equivalent to property or gold for that matter. With more trading and investment in this digital currency, the value is only soaring higher and higher. No doubt, we may as well see a new high in its price.

But what gives this invisible Bitcoin its value?

It is most sought after asset now with immense money being invested. Is it the nature of it being a currency or the nature of it being an investment? The most interesting thing is that most people are gradually shifting towards the use of this decentralized currency. It is true that the comparison with fiat currency draws its estimated value. But the large investments suggest that it is going to grow only bigger and bigger in size and stature. As BTC is becoming more and more used, the markets take to a compulsion of accepting BTC as a form of currency in exchange of the good and services. It is indeed interesting to note how Bitcoin in spite of all criticism is only proving to be that of a great success. Bitcoin gets its value from people, believing that it has value.

As you said this value can appear in a number of ways. Some people view it as currency in which they can transact in every day life, this means that an increase in speed of transactions and low cost of transactions would likely increase its value for these people. Other people now see it as a store or wealth, as you said like a digital gold, and for these people having it be secure and accepted by enough people will give it value.

The value of Bitcoin is cumulative of all the value ascribed by its holders. With more places accepting Bitcoin and if the lightning network or SegWit goes through we will likely see further value added to Bitcoin for all three above groups. One day we may realize Satoshi's vision. Honestly, investing bitcoin is like investing in gold, or gems. However, the value of bitcoin is not limited. Because, the Bitcoin value is expressed in usefulness and convenience with peer to peer settings and not through any intermediaries. So if many people use bitcoin or apply it to fields or projects then the value of Bitcoin is almost infinite. We, the people or what we call the market, gives bitcoin its value.

We believe that it has a value.

We invest in Bitcoin because we believe that we can make profit from it. More people who believe that Bitcoin's price will rise, the more people will be inclined to invest in it, making it to have a continuing higher price. The more people that doubt Bitcoin, the less people will invest in it, meaning less value for Bitcoin. In short, our belief in what Bitcoins value should be, creates its value.

It's value is up to us, whether we consider it as an asset or a currency, its value will always be up to us. Bitcoin offers an efficient means of transferring money over the internet and is controlled by a decentralized network with a transparent set of rules, thus presenting an alternative to central bank controlled fiat money. This creates real value for the currency. Gold has real value because it's shiny and can be used for jewelry. Other commodities get their value from industrial purposes. Similar to the dollar having value for paying taxes or gold having value for jewelry, Bitcoin has real value for private transactions, evading government restrictions, and making secure online transactions. 

Because it can do these things better than traditional currency or payment processors, it has inherent value. Bitcoin gets its value firstly from what it offers and It offers many things, A means of storing a degree of wealth which is not readily traceable by banks. This has many advantages, a few points outlined as follows. If in a time of economic or financial crisis banks decide they cannot make your FIAT funds available to you what can we do, we are powerless. As soon as we hand over our FIAT to banks we are at their mercy. Another advantage is that because Bitcoin and cryptocurrency are not traceable. A peer-to-peer payment system without the need of any bank. We control our digital funds and do not need to TRUST banks with our funds.

Secondly Bitcoin gets its value from the people who can see the benefit of what is outlined above, as well as its potential future value, speculation supposed it's called. So the buying and selling of Bitcoin currency also adds to its value. We speculate on many things in our lives so this is nothing negative. In economics, if something is both scarce and useful, it must have a value.

Same with Bitcoin, its scarce because it has a limited supply and it is a utility of it can be used in number of ways like payments and for investments. When something is considered scarce and utility it becomes expensive, it will demand value and price. Bitcoin's price is determined by the market where it trades, based on supply and demand. The interaction between buyers and sellers determines the specific price. But the price changes often because of its volatility. Bitcoin gets its value from the fact that:

  1. It offers an efficient means of transferring money over the internet.
  2. It gains legitimacy, larger scale investors, and more adoption.
  3. It's value is largely driven by speculative interest.
  4. It has small circulating supply.
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