Why are Bitcoins worth so much money?

stockssharesBitcoins are a form of digital currency. Transactions concerning Bitcoins are published in an open ledger for all to see. There are no banks or brokers involved. It has no physical form and therefore cannot be printed. It can be bought, sold, traded or saved. So what makes it so valuable?

For one, it has no affiliation to any country, meaning it is not subject to the rules and regulations of any nation. This makes it possible for a citizen to escape the harsh legalities surrounding traditional currency. However, a country’s government may decide to regulate the use of Bitcoin to prevent it being abused on the black market or being used for the purposes of evading tax.

Bitcoin offers a degree of anonymity. Any purchases made are near impossible to trace to an individual. This offers a level of security and privacy that traditional currency does not provide. It must be borne in mind, though, that a new address should be used for each purchase to minimise the chances of being hacked.

With the exclusion of third parties such as banks, interest rates are a non-issue and so is the threat of a frozen account. A transaction is easily and speedily completed with minimal fees, without the need for a bank account nor the questionable exchange rate for purchases across borders.

The limited number of Bitcoins available has a positive effect on its value. At the moment, there are just over 16 million Bitcoins in circulation. The number of Bitcoins will be capped once it reaches 21 million. A Bitcoin costs the equivalent of just under $900 in January 2017 in comparison to last year’s rate of just under $500. The decreasing amount of available Bitcoin may be a factor in this exponential increase.

The risk and fallibility of the system are counter-balanced by the potential earnings it can render.It must be understood that any commodity only holds value if we, as humans, attach said value to it. From the days of barter, where a number of eggs could hold the same value as a piece of fish to days where salt was considered precious to these days when the pieces of paper and plastic in our wallets are prized, humans have determined the price of everything. As such, people have determined that Bitcoins are a thing of value and that belief has made it a worthy asset to add to your portfolio.