Top Reasons Why Bitcoin (BTC) has Value
It has been discussed many times that it is difficult to analyse Bitcoin’s value. Indeed, understanding Bitcoin’s value might be complicated as there are now cash flows or offices running Bitcoin. However, there are many things that give Bitcoin the value that it has nowadays.
Let’s not forget that a few months ago, Bitcoin had a valuation of $1 trillion. According to data shared by CoinGecko, Bitcoin is now valued at almost $800 billion, which gives us a price per coin close to $42,000.
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In the next sections of this article, we are going to analyse different things that give value to Bitcoin. We are talking about some of Bitcoin’s characteristics that make it one of the most valuable assets in the world right now.
Bitcoin is Decentralized
Bitcoin is a decentralized network. In order for Bitcoin to operate, we need to know that there are no centralized authorities controlling it. That means that if you hold Bitcoin, then you can be sure that you can use it to pay for goods and services all around the world. Moreover, you will also be able to transfer funds without having to rely on a centralized authority.
Bitcoin transactions are approved by miners, which are located all over the world. Miners process transactions with specialized hardware (computers) called ASIC miners. These ASIC devices solve difficult calculations in order to be able to process all the transactions on the Bitcoin network.
The larger the number of miners located in different parts of the world, the more decentralized the network becomes. Additionally, the Bitcoin network works thanks to nodes. Nodes are in charge of storing the blockchain network and making sure that they validate network transactions.
Bitcoin is then decentralized, compared to traditional financial institutions that are centralized. The Bitcoin network would never be able to block your transactions if you decide to send them. Thanks to this blockchain network, it is possible to do so without having to be worried about centralized governments or financial institutions blocking your funds.
However, in order for Bitcoin to be decentralized, it requires participants to be involved in the network. That means that users who value Bitcoin’s decentralization should run a node or mine their own coins. Running a node is the easiest way to start helping the network become more decentralized.
Finally, holding Bitcoin in a hardware wallet or a wallet to which you hold your private keys is also very important. This would make things easier for investors that want to hold their funds and make sure that Bitcoin remains decentralized. If you hold your coins in a cryptocurrency exchange, your funds could be blocked and you might not be able to move them.
Bitcoin is Secure
The second one of our top reasons why Bitcoin (BTC) has value is related to Bitcoin’s security. Bitcoin is a secure network that relies on miners and nodes to make it decentralized, robust and secure. The larger the number of miners and their decentralization, the easier it becomes for Bitcoin to become a secure and reliable means of payment for users from all over the world.
Bitcoin’s hash rate has been growing since it was released to the market and it continues to move higher. The higher the hash rate, the more secure the Bitcoin network becomes. With the current energy consumption of the whole Bitcoin network, it might be almost impossible for a malicious party to perform an attack on Bitcoin’s network.
Indeed, Bitcoin’s electricity consumption is similar to the electricity consumption of countries such as Argentina, which means that the network requires a lot of energy to operate. Therefore, even if a country would decide to attack Bitcoin, it would not only need the necessary ASIC miners to do so, but it would also need the energy power to have a greater hash rate than most of the network. This is called a 51% attack, which has already affected smaller blockchain networks such as Ethereum Classic (ETC) in the past.
Bitcoin is therefore secure and reliable compared to other blockchain networks in the market. The larger the hash rate, the better for Bitcoin and its security. It is clear that one of the top reasons why Bitcoin (BTC) has value is linked to Bitcoin’s security. Without that, investors would not trust it and it would not be able to become a store of value.
It Works as an Alternative to Traditional Financial Markets
Further to our top reasons why Bitcoin (BTC) has value, is linked to the way in which it works. Bitcoin has been expanding as an alternative solution and network to traditional financial markets. This is very important.
Until 2009, centralized financial institutions ruled the world. Basically, if you worked, you had to receive your salary or money using a bank account or some type of legacy payment services. You were tied to the banking industry without the possibility to decide how to manage your money.
With the expansion of governments over people’s privacy, it became very clear that financial institutions had a privileged position in the market. Nowadays, we see how financial institutions collaborate closely with governments and keep track of every single transaction that users process.
This becomes more difficult on top of Bitcoin’s blockchain. Despite the fact that Bitcoin works on top of a public blockchain (all transactions are publicly available), it becomes impossible for centralized authorities and traditional financial institutions to block or control these transactions.
Hence, Bitcoin is expanding as an alternative financial solution for people all around the world, especially in countries where freedoms are at risk. Let’s not forget that Canada blocked the bank accounts of those individuals that funded Canadian truckers and their protests. With Bitcoin, it becomes more difficult to track individuals and to push them to behave in specific ways.
With a more decentralized network, Bitcoin could definitely become an alternative to the traditional financial system.
It Has a Limited Supply
When we talk about the top reasons why Bitcoin (BTC) has value, we definitely have to include Bitcoins’ limited supply. People don’t realize that fiat currencies depreciate over time because they can be printed at any time by centralized authorities (central banks). These central banks, despite being called “independent,” are usually working as an extension of the government.
Therefore, when we hold fiat currencies, we need to know that they lose value every single hour. It is very difficult to find a long period of time in which the supply of fiat currencies was reduced. Indeed, we are now living in one of the periods with the highest inflation in the last 100 years.
That means that Bitcoin becomes more valuable to investors. This is a unique asset that is scarce. This is something that cannot be modified. Therefore, Bitcoin gets value from this. While fiat currencies get debased over time, Bitcoin stands with 21 million BTC to be mined in the next few years.
At the time of writing, Bitcoin’s inflation rate is close to 1.72% per year. However, the inflation rate continues to move lower every single day. Let’s not forget that the network creates 900 BTC a day. After the next halving, Bitcoin’s inflation rate is expected to drop below 1%. This would let BTC become even more valuable.
While Bitcoin supply remains relatively stable (very low inflation rates), fiat currencies continue to be debased despite the negative effect that they have on society. This is one of the top reasons why Bitcoin (BTC) has value.
Bitcoin is Predictable
Bitcoin is also predictable. If you were searching for the top reasons why Bitcoin (BTC) has value, then Bitcoin’s predictability should be considered one of them. Compared to other types of assets that have a fluctuating supply, Bitcoin is predictable. Even if there are issues affecting miners, the adjustment of the network would easily push Bitcoin’s issuance to the norm.
We know that Bitcoin’s maximum supply is 21 million BTC and that this cannot be modified. Additionally, we know that Bitcoin’s community is trying to keep a very high consensus to pass new improvements to the network. This makes it more difficult for the whole network to change over time. This has many advantages, including the fact that it gives predictability to investors and to the entire crypto community. Let’s not forget that Bitcoin has also been heavily affected (in a negative way) when the network split into Bitcoin and Bitcoin Cash (BCH).
Furthemore, the community division when Bitcoin Cash forked into BCH and BSV has also harmed the entire network.
This is something known by the community, that has to remain united and strong against traditional financial companies. Bitcoin gets value if it stays strong and predictable. Thanks to its limited supply and its predictability, Bitcoin has become a valuable asset. However, there are still some issues that must be addressed by the community. For example, hard forks and network improvements should be considered very carefully.
Bitcoin is Easy to be Transported
Another important thing to take into consideration about Bitcoin is that it can be transported without problems. Bitcoin knows no borders. That means that rather than being worried about how to move goods from one place to another, Bitcoin holders have a great advantage.
If investors have to move gold, commodities or cash from one place to another, there are many restrictions that apply. In some cases, users and savers might have to pay additional fees and taxes if they want to change funds from one jurisdiction to another.
Bitcoin can be held using different types of wallets. If you hold your funds in a wallet and you hold your private keys, you can easily transport your Bitcoin from one jurisdiction to another one simply by remembering the seed phrase or private key. This makes it completely easy for investors to transport funds without having to be worried about governments imposing restrictions to your funds.
In addition, Bitcoin is safer to transport. This can be seen with the war in Ukraine. After Russia invaded Ukraine, people started to flee the country. Some people had to take all their money and funds abroad. This represented a very big problem to some people that couldn’t cross the border or that were attacked throughout the way by thieves.
Bitcoin, instead, would have allowed people to transport their life savings from one place to another without the risk of being stolen or attacked. This could have been done by simply remembering a seed phrase or backing it up. This could also be considered one of the top reasons why Bitcoin (BTC) has value.
In the future, it would be very important to see how governments deal with Bitcoin funds moving across the globe. This is definitely something that would create more issues and problems for governments than they expect.
It Could be Used as a Speculative Asset
Being considered a speculative asset is also a positive thing for Bitcoin at some point. Why? Simply because it attracts capital from all over the world to invest in it when it goes higher and when investors see an opportunity.
We have seen that Bitcoin became a speculative asset over the last few years. Nowadays, Bitcoin has become quite correlated to traditional financial markets. That means that there is a large number of investors that are entering the industry in order to profit from price fluctuations.
It is also worth taking into consideration that Bitcoin was more volatile in the past than now. This is due to the fact that Bitcoin became a more mature asset in recent years. Bitcoin has value because it can also be used as a speculative asset. Indeed, we consider it one of the top reasons why Bitcoin (BTC) has value.
Of course, Bitcoin’s use cases go beyond being used by speculators. Despite that, we should also acknowledge that there is a strong demand for BTC from investors that want to profit from price fluctuations in the market.
Bitcoin is one of the most innovative assets in the world. It was created in 2009 after the financial crisis that hit the world and it has been operating since then. Now, we see that there are many reasons why Bitcoin (BTC) has value.
Its price was able to hit $69,000 in 2021 and it could reach new highs in the coming years as well. Now, it is time for investors to decide whether they want to further invest in Bitcoin and how to do so. There are many reasons behind Bitcoin’s value and there might be other reasons in the future.
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