What is the Value of a Bitcoin?

We looked at whether Bitcoin is money in part 6 of the Bitcoin basics series; in part 7, we will look at how much bitcoin is worth.

Bitcoin was first sold for $1c USD for 1 BTC when it was launched due to Satoshi Nakamoto’s white paper and the mining of the genesis block.

What is the current worth of Bitcoin?

Bitcoin’s price has risen dramatically in the last three years, fueling significant rumors and hype that have added to the mystery and intrigue surrounding digital currencies. The cost of Bitcoin dropped dramatically in 2018, and the currency has been attempting to find support and breakthrough resistance in the markets ever since.

Where does Bitcoin’s value come from?

The recent price spikes in Bitcoin may give the impression that cryptocurrencies are a vacuum in which new money is suddenly “produced” out of thin air and that investors may “get wealthy quick” by investing little amounts in Bitcoin and seeing enormous returns.

That isn’t always the case, though. The value of Bitcoin is defined by the community’s investment and use and is maintained by distributing new Bitcoins into the market through the mining process.

As we saw in Is Bitcoin a Currency? The ability of any currency to operate as a store of value, a medium of exchange, and a unit of account determine its value. In other words, if people all over the world stopped using the US Dollar tomorrow and declared it worthless, the currency’s value would drop because no one would want to possess, trade, or issue it.

The Price of Bitcoin Has Increased

The cryptocurrency saw its first significant surge in 2011 when it reached a value of around $1 USD per 1 BTC; at the time, media coverage of Bitcoin’s gains attracted new users, causing the price to rise to as high as $30 USD per 1 BTC before a massive crash, which saw the value plummet all the way down to around $2 USD.

Bitcoin has had three significant price increases (in my opinion). New investors typically buy Bitcoin with an exit strategy in mind, allowing the cryptocurrency to acquire value in US dollars as it grows in popularity.

An investor, for example, might have bought Bitcoin when it was $1 USD and planned to sell when it reached $30 USD per coin. The investor should have made a 30x return on their initial investment by the time they exited.

As this process has uncovered in the past, media across the world have optimized to explore Bitcoin’s peaks and valleys. The cryptocurrency’s innovation, interesting technological foundation, and eagerness of investors to purchase the cryptocurrency have created what is referred to as an advertising loop in the past. This means that as Bitcoin becomes more “public” (or accepted), we may expect its value to rise over time.

The use of Bitcoin will eventually determine its worth. Since 2009, Bitcoin has appeared to have established itself as a type of “digital gold,” with investors able to buy shares (Bitcoins) and then sell them for a profit once their value has increased.

However, as a community currency network, Bitcoin may benefit the most when used as a traditional currency to buy products or services. We have seen large corporations like Microsoft and PayPal accepts Bitcoin as money in recent years, implying that as the cryptocurrency becomes a more universally acknowledged means of transaction, its value or “worth” may skyrocket.

How much will Bitcoin be worth in the future?

Investors and pundits have debated the subject of what Bitcoin’s ultimate value will be throughout the world. Simply put, we might not be able to determine a solid value.

Bitcoin has long been classified as a speculative investment due to its nature as a peer-to-peer currency network based on cryptography. Fundamentally, the eventual value of Bitcoin will almost certainly be determined by investors, governments, and institutions around the world signaling their interest to buy or utilize the money.

Bitcoin has a lot of potential as a decentralized worldwide network where parties may interact and settle payments in less than fifteen minutes on average. Because governments or central banks do not influence Bitcoin, it is not vulnerable to the same political or environmental factors that can affect the value of fiat currencies or precious commodities like gold.

The Bitcoin Consensus’s Value

Instead, Bitcoin’s value is primarily established by consensus: the agreement of people worldwide to use it as a store of value and a trade medium determines the worth of each bitcoin.

Different people throughout the world have their own viewpoints. Billionaire investors, like John McAfee, have stated publicly that one Bitcoin will be worth a million dollars by the end of 2020. Others, such as Warren Buffet, believe Bitcoin is only a speculative bubble that will not be worth significant amounts in the coming future.

Individual investors will develop their own exit strategy in the meantime, where they are willing to leave the market and ‘bank’ any revenue generated on their investments.

Combined with ongoing publicity, these factors will decide the future value of bitcoin as people worldwide either adopt it as a new standard or abandon it totally in favor of alternative cryptocurrencies, conventional fiat currencies, or precious metals.

Will Bitcoin Flop?

In the future, we might witness scenarios where Bitcoin’s value fades, and it is worth is forgotten, where the cryptocurrency is used alongside other fiat currencies as a “fringe” currency, or where parties across the world accept Bitcoin as a new worldwide payment standard.

The desire of parties to accept Bitcoin as currency and the willingness of businesses, central banks, and governments to invest in it or accept its use is now the most critical determinants of Bitcoin’s value in the future.

In this eighth part of our Bitcoin Basics series, we will look at how to buy and sell Bitcoin.