How is bitcoin value determined? Virtual shine of the digital gold

How is bitcoin value determined? Virtual shine of the digital gold

How is bitcoin value determined? This question, perhaps, is the key one, if we talk about cryptocurrencies in general. If this financial phenomenon is positioned as an alternative to the fiat money, its value must be guaranteed by somebody or something. The advantage of the digital assets is their complete independence from states and other monopolies, which in the real world are the very guarantors of value. To avoid cognitive dissonance let’s try to understand in detail the issue the bitcoin price formation.
 
Table of content:
- The difference in value of the traditional money and cryptos
- The number of BTC holders is of great importance
- How does information impact on the price?
- Mass BTC usage: fantastic or reality?
- Conclusion: the value of Bitcoin is made by people

The cost of real money VS Bitcoin
 
Any, even the smallest and weakest state, is in itself a monopolist in many spheres. The country's finances are under its complete control. It is about the issue of monetary units and their value. In other words, when you hold a certain banknote in your hands, you know that with this money you can buy goods or pay for a service. The paper itself does not cost much, but behind it there is the guarantor state. At the heart of bitcoin is decentralization, that is, no one and nothing guarantees its value. Many experts are sure that while people believe in cryptocurrency, it will stay afloat and even grow in price. Why did many decide to deal with virtual assets? This will be discussed below.
 
Innovative technology and protection against inflation
 
Money is the first to come under attack, when a crisis happens, problems in the country, wars and other challenges begin. Their depreciation is so rapid that in the history the situations are fixed, when yesterday it was possible to acquire a valuable thing, and today these same notes can be burnt in the fire. The savings that people collected over their years for crumbs into their accounts can be stolen easily. According to some experts, the technology, on the basis of which the cryptocurrency operates, allows you to protect yourself from inflation and any influence from outside. Often, all sorts of crises the government arranges manually, taking the welfare of its citizens down.
 
Also, by the decision of the state, the circulation of the domestic currency may be denied, and other monetary units will be introduced instead. In the case of bitcoin it is impossible. It will not cease to exist under any circumstances. Another attractive moment of the blockchain is the absence of outside observers. This accounting does not need to be checked for its reliability and transparency. The algorithm itself is arranged so that each transaction is fixed. As for the safety of savings, the creators still have a lot of work left to do in this field, but in terms of protection from counterfeiting and theft, Bitcoin is head and shoulders above the fiat assets.
 
Number of nodes and the level of demand
 
Another indicator of the cryptocurrency value is the number of its nodes. We are talking about active wallets. This information is not a secret and statistics are presented on the site of the crypto. The number of nodes, as well as the market capitalization of a virtual coin, is the determining criterion of the BTC value. The more users show interest in bitcoin, the better for it, especially in the case of a crisis. Logically, we are now talking about the demand and growing popularity, which push the price up. This moment is displayed by the digital currency exchanges, when more people want not to sell, but buy an asset. On websites without special analysis, you can see the growth in usage along with the enlargement of capitalization. The interest of large players - companies and even individual states - has a very positive effect on the price.
 
Information policy and hacker attacks
 
How is bitcoin value determined if there is nothing beyond the digital coin, but a computer program with the open code? As already mentioned, everything is based on the people's trust, on their expectations that the cryptocurrency will be better and more reliable than bonds, shares and other securities as an object for the investment. Nothing affects people's minds like news from the TV screen and the Internet. Positive information inspires buyers and raises demand. Negative one for example scandals and rumors can significantly reduce the price.
 
However, if the currency falls into difficult situations, for example, is exposed to hacker attacks, or if the new coin turns out to be a scum, then the demand for it can quickly go down. At the end we observe the situation when the value of the crypto can then start to go down even faster because most of its holders and miners will want to keep the profits. Such results can also impact on more than one crypto: for instance, a decrease in the
BTC price always led to the destabilization of the entire crypto market.
 
Mass introduction
 
If bitcoin came out to the masses, its value would increase at times. All this is explained by the fact that the total number of coins is limited, and a large demand would be a catalyst for the bitcoin price growth. What can be the impetus for the mass implementation of crypto? Only the use of virtual money in the real world is.
Simply put, we can buy for bitcoin, pay for services and get paid for the work. However, there is a vicious circle: who will act as a guarantor of value in this case, if decentralization and independence from states are the priority of digital gold? The question remains open and complicated.
 
Conclusion: Bitcoin at a cost of the air
 
While on our planet there is no need to buy air, material values ​​are becoming increasingly ephemeral. Precious metals and stones are far from everyone, and most of the people value money or securities. The value of both is confirmed at the level of states or large corporations. The value of the notes and bonds is confirmed by the gold and foreign currency reserves, the internal gross product or the property of a particular enterprise - real values in other words.
 
Bitcoin is absolutely new and for many is still yet unexplored phenomenon in the financial world, which is why many potential investors are slow to deal with it and consider it a soap bubble. How is bitcoin value determined? That’s very clear. People's interest in the future of payment systems and the hope that innovations will simplify payments, make them cheaper and safer, and also open other opportunities for doing business and contracting.



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