During its meteoric rise, mainstream attention has shifted to Bitcoin. The asset recently gained over $ 52,500 per coin. Bitcoin (BTC) has seen an increasing surge of interest from mainstream companies as it has achieved the status of a hedge unmatched by other asset classes. But what makes Bitcoin valuable?
Perhaps one of the simplest answers about the value of Bitcoin is that it is “worth what someone is going to pay for it,” as billionaire Mark Cuban stated in 2019. However, a number of other components play a role in the equation, which makes BTC unique from its competition. Although bitcoin is young compared to assets like gold and stocks, it still needs to hold its own and gain ground. The default of the asset is still possible and also volatile.
The history and basic uses of Bitcoin
The pseudonymous creator Satoshi Nakamoto published the written framework for Bitcoin in 2008. The asset was brought into circulation in early 2009 and was not tied to any particular value. BTC has circled online communities and the like over the years and has gained in value over time as an online payment method that did not require sensitive user information. Regardless of its historical price spike, Bitcoin today is often viewed as a store of value that has a number of valuable features.
People can buy Bitcoin on a crypto exchange and send it to a wallet that they control in person on a device or online. One of the selling points of Bitcoin is that users can send the asset virtually anywhere in the world, quickly, anytime, without revealing personal information, and control their holdings themselves.
Big player purchases
Over the past year, several large mainstream companies have built significant exposure to BTC. Tesla, one of the top 10 largest companies by market capitalization according to AssetDash, bought Bitcoin worth $ 1.5 billion, which was announced on February 8, 2021. In addition to others, Square announced a $ 50 million move to BTC in October 2020.
Business intelligence firm MicroStrategy bought over $ 1 billion under the direction of the company’s CEO Michael Saylor. As a former skeptic, Saylor is now one of the greatest proponents of wealth. He also owns more than 17,000 BTC personally since his October 2020 tweet.
The most recent Bitcoin purchases appear to have surfaced amid economic turmoil after COVID-19 caught public attention in early 2020. The U.S. government increased its money printer activity in the months that followed the pandemic outbreak through quantitative easing, leaving the future value of the country’s dollar a mystery.
The rationale for the value of Bitcoin
Bitcoin is a limitless, decentralized asset powered by a network of computers around the world (called miners), and its price is not technically tied to any government, market, or currency. At times price moves in line with other markets, while at times the value of the asset moves to the beat of its own drum. Some leading companies in the crypto industry, like Anthony Pompliano, co-founder of Morgan Creek Digital, are using BTC as an uncorrelated asset.
Fidelity Digital Assets released a report on Bitcoin in October 2020 which found “almost no correlation between the returns on Bitcoin and other assets” between early 2015 and September 2020.
Since joining the BTC arena, MicroStrategy’s Saylor, who ranks fourth on Cointelegraph’s list of the 100 best blockchain players for 2021, has conducted numerous interviews in which he has clearly expressed valuable aspects of Bitcoin. Saylor said in an interview with Cointelegraph in February 2021:
“I think the story that has much more to be told is that Bitcoin is a masterpiece of monetary engineering.”
“It is the first successfully developed currency network in the history of the world,” said Saylor after mentioning aspects of science and technology and his studies at the Massachusetts Institute of Technology.
“Bitcoin is turning away from the old Insight narrative this year that it is an uncorrelated speculative asset traded by retailers on offshore exchanges with leverage that is kind of cool,” said Saylor in interviewed HyperChange in December 2020. “It revolves around a new finding that is the world’s best long-term investment-grade safe haven treasury asset,” he added.
Saylor went on to mention Bitcoin’s long-term potential as a store of wealth that is beyond the control of the government, as well as a different mindset that comes with such a use case that led participants to hold BTC for longer periods of time rather than trading for shorter periods – term profits.
More BTC value arguments
Unlike national dollars, gold, or other assets, Bitcoin has a limited supply. Based on the code of the digital asset, only 21 million BTC will ever exist. At the time of publication, Bitcoin’s supply in circulation was around 18.6 million. Mining will release more BTC from its maximum supply into its circulating supply, but that maximum supply will not change. Meanwhile, the work and cost of creating BTC mark the more tangible point from which Bitcoin derives its value.
Bitcoin also makes it much easier for holders to store and transfer large sums of money than other hedging transactions like gold or real estate. Bitcoin has seen a fair share of comparisons to gold over the years – sometimes referred to as digital gold.
“You cannot belittle it; It’s not a fiat derivative like a bond or a stock, “Saylor said of Bitcoin during an interview with Nomad Capitalist in January 2021.” If you look at the long-term outlook – 10 years, 20 years, 30 years – this is it Owning Bitcoin as if you were encrypting your monetary energy in such a way that it is preserved for the long term without any impairment, “said Saylor.
Investors can purchase fractions of a Bitcoin, for example 0.001 BTC. Bitcoin can also be viewed as an industry or ecosystem of activity and development, much like the internet did decades ago, and buying Bitcoin offers the investor a financial commitment to that ecosystem, according to Tyler Winklevoss, co-founder of Gemini, a crypto exchange .
“It’s like owning a piece of the circuit without having to bet on which horse will win,” said Winklevoss during an interview with podcaster, YouTuber and entrepreneur Casey Adams in December 2020. “As long as the races are on, make some money, “added Winklevoss.
Arguments against Bitcoin
Some have made numerous arguments against Bitcoin over the past decade. The digital asset has gone through several volatile cycles, with the price rising dramatically, followed by subsequent retracement periods – sometimes up to 80% or more of the price decline over time, before the uptrend resumed.
Gold attorney and financial commentator Peter Schiff has repeatedly expressed his skeptical stance towards Bitcoin. “Now that #Bitcoin hits $ 50,000, I have to admit that an increase to $ 100,000 cannot be ruled out,” Schiff said in a February 2021 tweet, adding:
“However, a movement to zero cannot be ruled out either. While a temporary move up to $ 100,000 is possible, a permanent move to zero is inevitable. If you don’t want to gamble, buy #gold. “
Others have also called Bitcoin a bubble, such as Russian politician Anatoly Aksakov in early 2021. Also, Kenneth Rogoff, a professor at Harvard University, hesitated at BTC in January 2021. “I was a bitcoin skeptic, and certainly the price has gone up, but there’s sort of an ultimate question of what the benefit is,” Rogoff told Bloomberg. “Is it only valuable because people think it is valuable? It’s a bubble that would explode, ”he added.
While Bitcoin is not technically “backed up” by anything, it is also not tied to any particular country’s debt or struggle. It is human-powered, limitless, and allows users to hold and control their own funds as well as act quickly around the world. The asset has weathered a fair amount of adversity since its inception and is growing in acceptance with each cycle.
