You must have heard of bitcoins. If not, let us tell you about it. Bitcoin is a type of cryptocurrency that has become incredibly famous in recent years. When you search for bitcoin on the internet, you will be surprised to know that they are the most valuable cryptocurrency. Now, you would think, what is the reason behind bitcoins being so valuable? Is it fiat currency? Is it similar to the currency used to commence everyday transactions? Are bitcoins better than the other currencies mentioned?
You may have several questions running in your mind, and for this reason, we are writing this article today. Keep reading to know why bitcoins are so valuable among all other cryptocurrencies available.
One of the major aspects that impact the value of cryptocurrency is its rarity or scarcity. Bitcoins are available in limited numbers and therefore, they are better than silver or gold, or any other fiat currency. Additionally, bitcoins are durable, portable, flexible, safe, and also a smart investment as compared to any other fiat currency.
More About Bitcoins
Bitcoin exists in the present and has considerably grown in popularity in recent years. People are all using it and it is here to stay. The currency is working extensively and is also somewhat changing the financial models used across the globe. Bitcoins are the only form of currency that is known for progression to money.
You must have already seen that money has gone through several different forms throughout the history of humans, and it was first introduced as an alternative to the barter system. Click here to know more about Bitcoins.
Despite the havoc of the global pandemic, the bitcoin industry has experienced a significant boom. The crypto market capitalization, in which Bitcoin has a significant share, has already crossed the mark of $1 trillion. Out of the total market value held by crypto, bitcoin had a considerable share of about 69%.
Bitcoins are valuable and their prices are always on the rise. Let us dive into a few reasons behind it.
1. Halving Diverse Scarcity
We all are already aware that the supply of most of the cryptocurrencies in the market has limited supply in the market. Bitcoin is one of the cryptocurrencies that is valuable because of its limited supply. It was in the year 2021 only that the third Bitcoin happened. People are going crazy thinking about the benefits offered by cryptocurrencies and therefore, more and more people are investing in the currency to attain maximum benefits.
Bitcoin Halving is referred to an event that is critical in the network of Bitcoin and it happens every four years. With the help of a process known as Bitcoin mining, new bitcoins are introduced in the market, and this is how the bitcoin network works. Mining is done by bitcoin miners, after verifying the bitcoin blocks that are nothing but only groups of bitcoin transactions.
If a miner can verify a block of transactions and then add it to the network of Bitcoins, they get bitcoins as rewards. Halving is a significant factor that plays a crucial role in impacting the price of bitcoins. The stock to flow ratio also gets doubled, thus making the currency scarce. The ratio is calculated as the total currency available: the total currency in circulation.
The total number of bitcoins available in the market is only 21 million, and therefore the circulation of the market currency is less since the reward decreases. Also, when more people come to know about the scarcity of the asset, the demand for it rises, and hence, the price increases as well.
2. Adoption by Institutions
Almost all cryptos, especially Bitcoins are considered as one of the safe-haven assets, against inflation and even market volatility. The present economic and social environment brings a situation for people where they want to hold less cash and also stay ahead of the probable market swings. Even several companies are adopting the trend of converting their treasures into cryptocurrency, seeing its adoption by the government itself.
One after another several companies are following the trend and they are doing it to make the most of the crypto market. Corporate giants are relying on cryptocurrency and this factor has added merit to the currency in unexpected ways.
3. Easily Accessible
Another major reason behind bitcoins being so valuable is that cryptocurrencies are easily accessible by the general public. That said, cryptocurrencies are digital currencies that can be used as a mode of exchange and even as a store of value. It has started to gain attention and is being accepted as a legit payment method by almost every economy. Cryptocurrencies have also established themselves as a class of new assets in recent years.
However, many are still not willing to not use this payment system to carry out the transactions, but many are converting their cash into cryptos to attain the benefits. People are converting their cash since they believe that of deflationary nature and hence it makes cryptos a better store of value.
In India, after the RBI lifted the ban against cryptocurrencies, there was a surge in the number of investors. Several platforms have successfully launched funding and they have received the same in this space. With cryptocurrency becoming more accessible to the general public, more retail investors are moving forward and they also desire a share of the same asset class. Moreover, they can pay more as well, if required.
If you see the rise in prices of bitcoins and consider the popularity of cryptocurrency, don’t think that you are too late in investing in bitcoins, instead understand it is the beginning. More and more countries are seeking to regulate the crypto market, they are sure to become too mainstream. However, bitcoins are not the same as gold and silver, since gold can be mined as and when required. On the contrary, bitcoins are limited in nature, whereas the government can produce other currencies periodically. That said, the scarcity of bitcoins has increased considerably and is therefore of high value.