With the rapid rise of Bitcoin, mainstream attention has turned to Bitcoin, and the price of Bitcoin has recently exceeded $57,500. Mainstream companies are increasingly interested in Bitcoin, which, as a hedging tool, stands out among other asset classes. However, what makes Bitcoin valuable?
Regarding the value of Bitcoin, perhaps one of the simplest answers is that, as the billionaire Mark Cuban said in 2019, the value of Bitcoin is “the price others are willing to pay for it.” However, there are many other factors that make Bitcoin unique from the competition. However, compared to assets such as gold and stocks, Bitcoin is still young, so it must continue to prove itself and gain attention. Such assets may still fail and are prone to volatility.
The history and basic uses of Bitcoin
The anonymous creator Satoshi Nakamoto published a white paper on Bitcoin in 2008. Bitcoin subsequently began circulation in early 2009, with no clear value. Bitcoin, as an online payment method that does not need to involve sensitive user information, has existed in such places as online communities for many years, and its value has increased over time. Regardless of the history of Bitcoin’s price increase, Bitcoin is now generally regarded as a store of value with many valuable characteristics.
People can buy bitcoins on cryptocurrency exchanges and send them to wallets they control on their devices or online. One of the selling points of Bitcoin is that users can quickly send virtual assets to all parts of the world anytime and anywhere without revealing personal information, and they can also control the assets themselves.
Big players buy
In the past year or so, many large mainstream companies have increased their investments in Bitcoin. According to AssetDash data, Tesla is one of the 10 largest companies by market capitalization. On February 8, 2021, Tesla announced that it had purchased $1.5 billion worth of Bitcoin. In addition to other companies, Square also announced the purchase of $50 million in Bitcoin in October 2020.
MicroStrategy, a business intelligence company, purchased more than $1 billion in Bitcoin under the leadership of its CEO Michael Saylor. Saylor, who was once skeptical, has now become one of Bitcoin’s biggest supporters. Starting in October 2020, he personally also owns more than 17,000 BTC.
After the covid-19 pneumonia has attracted public attention in early 2020, the recent bitcoin purchases seem to have surfaced in economic turmoil. A few months after the outbreak of the pandemic, the US government injected a large amount of liquidity into the market through quantitative easing, which also made the future value of the dollar a mystery.
Fundamentals of Bitcoin value
As a borderless, decentralized asset, run by computer networks (called miners) around the world, technically speaking, Bitcoin and its price are not related to any government, market or currency. Sometimes its price is consistent with other markets, and sometimes the value of Bitcoin fluctuates at its own pace. Some crypto industry leaders such as Morgan Creek co-founder Anthony Pompliano treat Bitcoin as a non-related asset.
Fidelity Digital Assets released a report on Bitcoin in October 2020 and found that between the beginning of 2015 and September 2020, there was “almost no relationship between Bitcoin’s earnings and other assets.”
Since entering the Bitcoin arena, Saylor of MicroStrategy is ranked fourth on Cointelegraph’s 2021 Blockchain 100 list. He has given many interviews in which he clearly explained the valuable aspects of Bitcoin. Saylor said in an interview with Cointelegraph in February 2021:
“I think it needs more explanation. Bitcoin is a masterpiece of monetary engineering.”
Saylor said after referring to science and engineering and his research at MIT: “This is the first currency network successfully constructed in the history of the world.”
Saylor said in an interview with HyperChange in December 2020: “Bitcoin is changing from the past view this year, that is, it is an unrelated speculative asset that is traded by retail traders using leverage on offshore exchanges.” He added: “It is transforming into a new view that this is the best long-term investment-grade safe-haven asset in the world.”
Saylor went on to mention the long-term potential of Bitcoin as a wealth storage tool that is not controlled by the government, and a different mentality brought about by this use case, leading participants to hold Bitcoin for long periods of time instead of trading for short-term profits.
More Bitcoin Value Views
Unlike the U.S. dollar, gold or other assets, the supply of Bitcoin is limited. According to the Bitcoin code, only 21 million BTC will exist. At the time of publication of this article, the circulation of Bitcoin is approximately 18.6 million. Through mining, more bitcoins are released into its circulating supply, but the maximum supply will not change. At the same time, the work and expenses invested in mining bitcoin indicate where the value of bitcoin comes from.
Compared with other hedge assets such as gold or real estate, bitcoin holders can also store and transfer large sums of money more easily. Over the years, Bitcoin has been compared to gold—sometimes called crypto gold.
Saylor said in an interview with Nomad Capitalist in January 2021: “You can’t belittle it; it’s not like fiat currency derivatives like bonds or stocks.” Saylor explained: “If you look into the long-term prospects of 10, 20, 30 years, then owning Bitcoin is like encrypting your currency energy, and there will be no degradation in the long term.”
Investors can buy small bitcoins, such as 0.001 BTC. Tyler Winklevoss, the co-founder of the cryptocurrency exchange Gemini, said that Bitcoin can also be regarded as an industry or ecosystem of activity and development, similar to the Internet that emerged decades ago. Buying Bitcoin allows investors to participate in this ecosystem. Gain financial exposure in the system.
Winklevoss said in an interview with podcast host, YouTube user and entrepreneur Casey Adams in December 2020: “It’s like owning a racetrack without betting on which horse will win.” Winklevoss added: “Just the game. It’s still going on, you can make money.”
Views against Bitcoin
In the past ten years or so, some people have expressed many opinions against Bitcoin. Bitcoin has gone through multiple cycles of volatility, and the price has risen sharply, followed by a callback period-sometimes, over time, the price of Bitcoin has fallen by as much as 80% or more before it can resume its upward trend.
Peter Schiff, a gold advocate and financial commentator, has repeatedly expressed his skepticism about Bitcoin. Schiff said in a tweet in February 2021: “Now that Bitcoin has reached $50,000, I must admit that the possibility that Bitcoin will rise to $100,000 cannot be ruled out.”
“However, the possibility of returning to zero is not ruled out. Although it is possible to temporarily increase to $100,000, it is inevitable to return to zero permanently. If you don’t want to gamble, then buy gold.”
Others also call Bitcoin a bubble, such as the Russian politician Anatoly Aksakov in early 2021. In addition, Harvard University professor Kenneth Rogoff showed hesitant attitude towards Bitcoin in January 2021. Rogoff told Bloomberg: “I have always been skeptical of Bitcoin. Of course, the price of Bitcoin has risen, but the ultimate question is what is its use. Is it valuable only because people think it is valuable? This It’s a bubble that will burst.”
However, although technically speaking, Bitcoin does not have any “support”, it is not tied to the debt or dilemma of any particular country. It is run by people, without borders, and allows users to hold and control their own funds, as well as fast transactions on a global scale. Since its creation, Bitcoin has experienced considerable adversity, and has been increasingly adopted in each cycle.