The way a currency is created and distributed is quite simple. Bitcoin has rules that assure both its demand and supply. If you have no prior experience trading bitcoin, you can still execute profitable trades by going to https://bitsoftware360.com/. In the below-mentioned portion, we will bust the myth that bitcoin can go to zero.
Bitcoin came about as a result of government mismanagement of traditional currencies – primarily the high inflation rates in countries like Argentina and Zimbabwe, which makes it difficult for people to do commerce without their currency for stability purposes. On average, the world’s 7 billion people have just $3,000 in savings.
For many people worldwide – those who live in an informal economy outside of banks and exchanges – bitcoin provides a lifeline when they need it most. The argument against bitcoin being eternally doomed to zero is a lack of intrinsic value. The obvious answer is that the supply of bitcoins will never be able to meet the demand on both the physical and digital exchange markets, so it must continue to grow.
The paradox:
The paradox of this argument is that most bitcoin holders don’t want more bitcoins because they believe there is a finite amount. Many economists are confident that bitcoin will fail because it has no fundamental value. They feel that sheer market forces alone will eventually collapse, regardless of what its supporters think. In other words, the only way bitcoin can be worth anything is if people believe it’s worth something.
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That fact alone should give it a solid value. But is that enough? Many economists have a hard time understanding that the value of something is not derived solely from its utility as a medium of exchange or even its usability as a form of currency. It has intrinsic value too. The concept may seem complicated to grasp at first, especially for those who still believe that even intrinsically worthless gold has an inherent value based on its industrial uses in electronics and dentistry.
The Gold bugs of the world may scoff at this concept, but I think it is not far from where many people are thinking. Although gold does have some industrial uses, bitcoin has none. However, its value as money and a store of value is based on its limited supply in the wild and the fact that users can always turn it into small units (micropayments).
So you can see that all of the arguments put forward by people who oppose bitcoin as a form of money or currency can be removed by its supply and demand. Most economic theories that support an intrinsic value are based on the maximum amount of money, not its source.
To sum up, Bitcoin is much more valuable than gold as a store of value because:
- There is a finite amount of gold in the world, and any person or institution cannot manipulate its production rate.
- A mathematical formula regulates the supply of bitcoin, so it can never exceed 21 million.
- The supply of gold can be manipulated at will by any party with a vested interest in doing so (central banks).
- There are only a few million bitcoins out there – which only the miners have access to – and not more than 10% have been mined so far, while there are over 200,000 tons of gold on earth that has already been mined and is circulating on planet earth (in jewellery, bars and coins). 5. The market cap of bitcoin is much lower than that of gold, so there is much more room for growth once it becomes accepted in the mainstream.
- The demand for bitcoin is increasing every day, whereas the demand for gold (as an investment) has been pretty much flat for a long time now, and its price has barely moved over the past decade.
- Bitcoin is easy to transfer at super low fees without worrying about converting it into other currencies or waiting days before you can use it (like fiat).
Why can the value of bitcoin not be zero at all?
- Bitcoin is backed by a network of miners who maintain its integrity.
- Bitcoin is deflationary, so the supply will continue to shrink, and the value will grow. However, it will never become negative because of the finite amount of bitcoins and the mathematical formula that guarantees it. The units (coins) are divisible up to 8 decimal points, so you can think of it as having infinite amounts of micro-payments (0.00000001 bitcoin).
- Bitcoin can handle micro-payments, whereas gold cannot.
- Bitcoin is global and can be bought by anyone globally, whereas gold cannot.
- Bitcoin is a free market currency whose value will be determined by supply and demand, which means that the new supplies added to the market will decrease the value of all existing bitcoins on the market (i.e., deflation).
- Bitcoin is a currency with no monetary policy attached to it, just like gold doesn’t either. Still, it has value as a store of wealth because of its limited supply and no inflation or deflationary rate attached to it(like fiat money).
