Bitcoin is regarded as one of the most successful cryptocurrencies ever invented because of its huge market cap, estimated at over $1 trillion. It’s generally considered a safe investment, exhibiting lower volatility than other digital assets, but it’s still more volatile than traditional options, such as stocks.
It’s impossible to determine how many Bitcoin users there are precisely due to the pseudo-anonymous nature of the network, so we can only estimate ownership. On-chain data illustrates there were over 81 million Bitcoin wallet users in 2022, representing the general market sentiment. If you want to buy or sell at the Bitcoin price today or store your crypto coins for trading later, cryptocurrency exchanges make it possible to do so with absolute ease. It’s no wonder that people invest in, trade in, or use Bitcoin.
Bitcoin Has Demonstrated Its Intrinsic Value to The World
The intrinsic value of money lies in its purchasing power – in other words, what you can buy. It serves as a medium of exchange, enabling individuals and businesses to obtain what they require to live and thrive. Above all, its use is backed by the government.
Cryptocurrency is a digital, encrypted, and decentralized medium of exchange, with users being attracted by low transaction costs and its peer-to-peer design. Bitcoin can be used to pay for goods and services, yet, unfortunately, there’s a mismatch between customer demand and merchants accepting cryptocurrency payments. As we all know, it doesn’t have the backing of government authorities or a system of financial institutions to propagate its use.
Bitcoin has intrinsic value because it has other uses besides being a medium of exchange, offering solutions to different challenges. In what follows, we’ll quickly go through different use cases of Bitcoin that go beyond digital money.
- Store of value & hedge against inflation. Bitcoin is a store of value, meaning that it can offer a good return on the investment. It has use cases in healthcare, supply chain management, real estate voting, etc. Bitcoin is scarce, and therefore, it’s a store of value. The circulating supply is capped at 21 million, which makes it rare. The scarcity of Bitcoin provides a hedge against inflation, meaning it maintains its value during tough times.
- Financial inclusion. Households have limited access to financial services, especially after the 2008 financial crisis. Since they don’t have access to saving and borrowing instruments, they’re at a disadvantage from an economic standpoint. Bitcoin offers access to anyone with an Internet connection, so there’s no need for a traditional bank. Also, Bitcoin decreases the cost of sending remittances to friends and family.
- Smart contracts. Smart contracts remove the need for intermediaries in transactions and agreements by using blockchain technology. The terms between buyers and sellers are written directly into the lines of code. Not many know that Bitcoin can be used to power smart contracts, enabling individuals and businesses to benefit from opportunities. The Bitcoin ledger stores the agreement, giving it security and immutability.
The Price of Bitcoin Is Fundamentally a Measure of Its Success
As mentioned previously, Bitcoin has served as a successful cryptocurrency in spite of the intermittent ups and downs, but there’s no guarantee that you’ll make a lot of money by investing. Many experts cite intrinsic value as a case for Bitcoin and consider its unique circumstances a mediator variable for cryptocurrency adoption. The value of Bitcoin can change with the economy, user tastes, or time. The point is that intrinsic value isn’t a reliable indicator of Bitcoin’s success. So, what is it, then? Price reflects the asset’s actual value. A stock’s price indicates its value, so the same standard should apply to cryptocurrency. At least, that’s what some believe.
Pricing defines the value Bitcoin is worth, so it makes sense for people wanting to know if it’s worth their time and investment. When talking about the relative worth of Bitcoin, it should be categorized as a commodity because its price is driven by supply and demand. More precisely, Bitcoin’s market value is contingent upon how many tokens are in circulation and, most importantly, how much people are willing to pay. The Bitcoin supply is currently 19.31 million, and the experts predict that the total amount issued will never exceed 21 million because the code base features rounding operations.
Therefore, Do You See the Need for Bitcoin in Your Portfolio?
Bitcoin ownership is concentrated in a few hands, which translates into the fact that the top individual investors control roughly one-third of the coins circulating. Most Bitcoin addresses don’t represent individuals but exchanges or other parties that hold cryptocurrency on behalf of other investors.
For Bitcoin to be more egalitarian than fiat money, it’s imperative to redistribute financial power. In spite of the great attention that Bitcoin has received recently, the ecosystem is dominated by concentrated players, whether exchanges, miners, or Bitcoin holders. Your decision to trade depends on your risk tolerance, account size, and trading strategy, not to mention your experience in the cryptocurrency market.
The price of Bitcoin is the basis of technical analysis and helps you time entries and exist without relying on news or opinions. Remember that the returns on buying and selling Bitcoin on mobile phones or PCs may be subject to tax, including capital gains tax, so you’ll pay ordinary tax rates.
Most importantly, Bitcoin’s past performance isn’t a guarantee or a predictor of future success, so you must strike a balance between various parameters of decision-making; the value of Bitcoin could increase or decrease, so you could lose a significant amount of your purchase. Essentially, there’s no such thing as a good or bad trade; they are simply trades made according to a specific scenario.
Conclusion
Bitcoin has an independent value, and it’s hard, if not impossible, to measure this value because there are no formal price indices. Its price reflects its potential and future viability; it can be measured and evaluated in the same ways as foreign exchange rates.
Bitcoin’s supply is predetermined, and its scarcity has increased with time, so it doesn’t come as a surprise that investors are interested in a slice of the pie. In fact, cryptocurrency in general, continues to be a valuable asset today.
