Why is Bitcoin Valuable and What factors influence Bitcoin Price?

Why is Bitcoin Valuable and What factors influence Bitcoin Price?

Why is Bitcoin Valuable?

There are many who think Bitcoin is actually of zero value. However, given its limited supply and increasing usage for payment, it does have value

  • In Layman’s language, Bitcoin is like Gold hidden inside a computer network instead of a mine in Africa. The creator(s) deliberately created a limited number of them and created a whole range of difficult tasks to get them. Just like in real gold mining, Bitcoin mining becomes difficult if more people mine at the same time or as the number of BTCs keeps reducing. It cannot be used as ornaments, one of the big factors that drive Gold value.
  • To solve this problem, the creators designed it in the form of a currency that is authenticated via a blockchain. Over the last few years, BTC has increasingly been used as an alternative to the US Dollar or other National Currencies. It is now accepted on payment by many companies around the world.
    • There are differences with the National currency as well. The value of a national currency like the Dollar is enhanced or reduced by numerous factors – The number of dollars the Federal reserve prints, how the Fed manages interest rates, the performance of the economy, and so on. However, among these, the role of a Central Bank (like the Federal Reserve) is a crucial difference with respect to BTC. The Federal Reserve ensures that the Dollar does not undergo wild fluctuations in short periods of time so that households and businesses can manage their lives better. While BTC enjoys the absence of central control and therefore any form of voluntary devaluation, it suffers from more volatility.

BTC’s price over the last 10 years

Why is Bitcoin Valuable and What factors influence Bitcoin Price?

What factors influence Bitcoin Price?

Factors that have a Positive influence on BTC PriceFactors that have a Negative influence on BTC Price
Liquidity
Bitcoin Adoption
Inclusion in mainstream ETFs
Supply of BTC from Miners (Lower)
Cost of producing a Bitcoin
BTC Domination (Higher)
Inflation and higher interest rates
In-market issues like LUNA etc
Supply of BTC from Miners (Higher)
BTC Domination (Lower)

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Investopedia: Why do Bitcoins have value?

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