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Bitcoin has become one of the most valuable and lucrative financial assets to invest in over the past few years.
Its foundation on the concept of offering an alternative to traditional money has caught the eyes of speculators and prospectors.
These factors combined with media hype has caused massive demand from all kinds of investors including individuals, hedge funds and banks.
Within the last decade, the price of bitcoin has skyrocketed and seems like there is no end to it.
The biggest question on everybody’s mind is, what is the real value of bitcoin? Is it still worth it to acquire or is it a bubble awaiting to burst?
There can never be a yes or no answer to this question, however, we can try to infer by looking at the known facts.
Read more on Bitcoin:What You Need To Know About Bitcoin Before Getting Into It
It is in the interest of every investor to invest in assets that offers most returns. Some of these assets have lived to this fact by offering value for hundreds of years.
A key example is gold. Gold has been used as a money standard for hundred of years but this due to various reasons.
Among the reasons are it is not easy to produce, it is globally acceptable, is malleable and also it is hard to counterfeit.
These characteristics have made it widely accepted and dominant over the normal fiat money.
This is a similar concept bitcoin is trying to duplicate and for it to succeed, it must have some if not all these features. The laws of economics dictate that scarcity and value go hand in hand.
Gold is valuable because it is rare. Similar to its peer metals, scarcity tends to create value. Therefore this aspect has enabled gold to maintain its value for hundreds of years.
Bitcoin on the other has tried to replicate this aspect by introducing two important factors. The presence of a supply cap that only 21 million Bitcoins will ever be in existence and secondly, making the process of mining very tiresome and expensive such that only a few people can actually manage to do it.
By limiting supply to 21 million coins, Bitcoin has been able to maintain its worth because only a few have access to it. Together with increasing demand Bitcoin has a massive influence on its value growth.
For a currency to become global, it should be accessible by the masses with little fuss, a feature that Bitcoin doesn’t possess. As its price goes up, it is becoming extremely difficult for the common people to afford.
This has created exclusion and made it more difficult to become an alternative currency. Another important negative characteristic of Bitcoin is acceptability.
For it to get to gold standards, there must be a global acceptance so that it is simpler to carry out global business. This is not what is happening today.
We are in a situation where some governments have completely ceased using it while others have restricted its use. These are setbacks to Bitcoin becoming an alternative global currency.
Lack of global synergy will only end up lowering its relevance resulting in the loss of value. In fact, a lot of countries are choosing an alternative path of creating their own digital currencies replicating their existing fiat currencies.
We have already witnessed this happening in China, Ecuador, Singapore, and Senegal. This will without a doubt reduce the relevance of Bitcoin in the long run.
The third success factor of gold and any money in use is malleability. It is the ability to break it down into small portions that can be allocated worth without any controversies.
This is one strong feature bitcoin offers due to its digital aspect. It is very easy to divide digital assets by the click of a button without any expense or physical divisions required.
The only drawback in doing this is that users need to have access to electronic gadgets including a phone or a computer. This is a requirement that has not yet been achieved in many parts of the world.
If we were only to consider malleability, then bitcoin would be the asset of choice that no physical money or gold would compete with.
Have in mind that paper money and gold are physical and tangible hence bulky to handle. Based on these factors, it is good to note that there are still some unresolved gaps we have to fill before we can say bitcoin will be a success.
Price volatility remains a drawback for cryptocurrencies. This is mainly due to the lack of a central regulator tasked with controlling unpredictable price movements.
Most of the users of Bitcoin today only use it as an investment asset as not as a currency. This partially indicates minimal enthusiasm in Bitcoin as Currency.
Lately, there have been talks about the consequences of mining Bitcoin on global energy security. Mining Bitcoin utilizes a lot of energy an aspect that has caught the eyes of climatic activists.
This could see the value of Bitcoin dwindling in the long term as more mining restrictions come into place and climatic-conscious investors keep off.
In conclusion, there are mixed thoughts and reactions to the future of Bitcoin. The aspect of decentralization, supply cap, and market leadership could keep pushing the price of Bitcoin higher.
However, this will depend on the policymakers’ actions and if there will be more real-life utilization of the coin as any of these actions could break the current bubble.
Do you think it is worth it to invest in Bitcoin? Let me know in the comment section below.