Unless you’ve been living under a rock – chances are you’ve probably heard about what many have taken to calling “digital gold”: Bitcoin.
Stepping Back Into Time – Bitcoin’s History and Characteristics
First introduced to the world in 2009, Bitcoin (BTC) was developed by the mysterious Satoshi Nakamoto. Based on his white paper, Nakamoto posited that Bitcoin and other digital currencies would be able to serve as a buffer against inflation.
Anyone in the crypto community can mine their own Bitcoin – unlike fiat currencies Bitcoin is totally decentralized.
Also, there is a limited supply of Bitcoin – 21 million to be exact. Once all available Bitcoins have been mined, no new Bitcoins will be issued.
Thus making it theoretically impossible for there to be an oversupply of cryptocurrencies – which in turn (hopefully) makes Bitcoin relatively resistant to inflation.
Is Bitcoin Actually Worth Anything?
This is a question that is routinely asked by new investors and sceptics alike.
The short answer is that Bitcoin can be both simultaneously worthless and the equivalent of digital gold. All at the same time.
Why? Because Bitcoin and other cryptocurrencies break all of the rules with regards to how currency actually works.
Firstly, cryptocurrencies like it do not exist in the physical world. Cryptocurrencies are digital assets that cannot be held or traded physically. Instead, we make use of crypto wallets that store them.
Transactions performed with cryptocurrencies are instead recorded and maintained on the blockchain.
Besides only existing in the digital realm, the value of cryptocurrencies are not guaranteed by any monetary authority or government. Unlike fiat currencies, Bitcoin is a fully decentralized asset that is not issued by any government or central bank.
Because of this, it is technically possible for Bitcoins and other cryptocurrencies to be totally valueless should the market bottom out.
However, it is these traits that make Bitcoin such a valued asset amongst investors and certain individuals.
2020 and the first quarter of 2021 was a momentous time for the cryptocurrency market.
Rising uncertainty and fears of inflation saw the price of Bitcoin, Ethereum, and other cryptos going through the roof. The good times however did not last as announcements from China and several high profile tweets from a certain billionaire once again sent prices tumbling.
How Much is One Bitcoin Worth?
At the point of writing, Bitcoin is currently valued at $39,272 – a far cry from the days when BTC was valued at above $63,000.
Strangely enough however, the market for cryptos hasn’t quite bottomed out or crashed as many would have predicted. Given how BTC investments have been regarded as something of a hedge and rising interest from institutional inventors, it would be foolish to write off BTC now.
In fact, post-pandemic we may even see Bitcoin and other cryptocurrencies playing a larger role in our lives. Right now, fears of rising inflation means that investors will likely seek alternative investments as a hedge against fast devaluing currency.
And this may be the news that crypto enthusiasts have been waiting so long to hear – the mainstream uptake of cryptocurrency as an asset. With demand for Bitcoin and other cryptocurrencies on the rise once again, prices may once again recover or even exceed what they were before.
Learn more about the value of cryptocurrency in this article from Tezro.
While it’s okay to be cautiously optimistic about the future of cryptocurrencies – the fact is that digital assets have always been barely tolerated by governments.
As we’ve seen before, Bitcoins and other cryptos can be used for all manner of illegal transactions – from money laundering to capital flight.
The decentralized nature of these assets and their independence from the traditional banking system is of particular concern for many governments. So, it would be reasonable to expect some legislation to take place in the days to come. And that would be something that may have an adverse effect on cryptocurrency prices.