Although bitcoin has been around for more than a few years, its only really been in the last year that the crypto currency has taken off in value. As a result, a common question being asked by consumers is what exactly makes bitcoin valuable? For those who are financially educated, this question can cause some debate as bitcoin is not backed by a third-party like a bank or a government. As a result, it makes it challenging to answer the question regarding where its perceived value does come from?
Why Does Money Hold Value?
When you are first posing the question about why bitcoin and other crypto currencies are making news for their value, one should ask the question about why any currency holds value. Basically, all currencies are worth “something” because people value them, and they play a critical role in our modern economy. Today, you can use money to trade for just about any type of good or service and they are used as a store of value. This helps make just about everything easier from buying food to investing and more. They key is having the currency backed by a federal government and the people who use it believing in the value of the money.
Why is Bitcoin Valued by Consumers?
Bitcoin and other alternative currencies are not accepted as legal tender (yet) like U.S. dollars, Euro, and other major currencies. They also do not hold value like gold and silver do as a physical commodity. Instead, there seem to be a number of reasons that have propelled bitcoin and other crypto currencies into the mainstream when it comes to holding value. In no particular order, some of the major reasons that bitcoin holds value for consumers are:
1 – The crypto currency is just popular…world-wide. Across national boundaries, people accept it and trust it as a source of value.
2 – Bitcoin is limited in the total number of coins that will be produced, and it is decentralized. This helps protect against devaluation through inflation.
3 – The crypto currency acts similar to a traditional equity investment.
4 – Although not universally accepted and not backed by a government, the currency is serving as a store of value since it can be exchanged with traditional currencies in most countries.
5 – Bitcoin has created its own ecosystem where other currencies are not required, and is often the common currency when trading or dealing with alternative crypto currencies, or transactions across borders.
So What Really Makes Bitcoin Valuable?
At the end of the day, what makes bitcoin valuable are many of the factors that make regular currency worth something in addition to some of the unique factors that go with crypto currency.
How Can You Get Started Buying Bitcoin?
If you live in the United States, the easiest way to get started with buying bitcoin, litecoin, and more is to signup for a free account at Coinbase here. If you buy or sell $100 or more of digital currency then you will get $10 free of bitcoin (and we will too!) until the company discontinues their offer. Enjoy!
How Can You Get Started Buying Alternative Crypto Coins?