With the passage of time more and more people are getting interested in the world famous cryptocurrency and Bitcoin. And as the number of people is increasing, the questions are increasing too. One of the most common question that you’ll hear from people is, “Why does Bitcoin have a value?”. The reason why this question initiated in the first place is because people out there are unable to grasp the idea of a digital currency having an actual value.
The Answer
If you study Bitcoin in detail, you’ll see that the answer to the above asked question lies in the basic economics: demand,supply, utility and scarcity. According to economics if something is rare yet if the demand is high then it is supposed to have a value and it should have a specific demand price. Here you can take gold as an example. Have you ever thought that why exactly is gold so expensive? Well, just as Bitcoin, there are three major factors behind it, gold is rare, its demand is quite high and it is useful. Now, three of these factors justify that yes gold must be expensive and the same rule applies on Bitcoin.
The price and the overall value of Bitcoin is also determined based on the supply and demand of it.
How is The Price Of Bitcoin Determined
Bitcoin is a very interesting cryptocurrency and it’s price is not the same as its value. You see the price of Bitcoin in basically determined by the situation of the market or in other words you can say that the price of Bitcoin depends upon the supply and demand of this currency. Determining the price of Bitcoin is no rocket science. In fact, it is just the same with gold, with a bag of apples or anything that is scarce but high in demand.
In a nutshell the determination of the price of Bitcoin is based on the interaction between buyers and sellers that trade Bitcoin with one another. The use of Bitcoin is increasing at a rapid pace and now people can even buy Bitcoin with credit card.On the other hand there are a lot of shops and markets in the world that have started accepting Bitcoins instead of cash so the more the use is increasing, the more the price is going up.
Why Does The Price Of Bitcoin Keep Changing?
The change in the price is called volatility and it’s not only Bitcoin that is volatile in fact all the cryptocurrencies out there fluctuate a lot when it comes to their price. A lot of people even question this volatility of Bitcoin. But only a few know that the same three factors, scarcity, demand and supply are the reasons behind the fluctuations. Remember, Bitcoin is very similar to gold and other precious metals out there and the rarer a product is, the more volatile it will be.
Hi there! I’m Sethu, your go-to guy for all things tech, travel, internet, movies, and business tips. I love sharing insights and stories that make life more interesting. Let’s explore the world together, one article at a time!
