Bitcoin is one of the most valuable digital currencies available today. Its value is extremely high when compared to traditional currency. 1 Bitcoin is worth more than 5,000 times the Kuwaiti Dinar, which is currently the most valued physical currency.

Why Does Bitcoin Have Value?

Built on blockchain technology as the first-ever cryptocurrency, Bitcoin has become highly valuable globally and facilitates the efficient trade of commodities and services. Much like the US Dollar, the Indian Rupee, and every other traditional fiat currency, Bitcoin has its own value and is widely accepted as a medium of exchange today.

As the rising and falling of Bitcoin value continues to acquire prominence and generate news in the global finance market, newcomers to cryptocurrency often find it challenging to comprehend how the digital currency, with no government or physical backing, manages to have any value at all. 

It's noteworthy that Bitcoin has some similarities to the fiat money we are all used to, despite the apparent distinctions. So understanding how conventional currency has its worth will be critical to knowing why cryptos like Bitcoin have value.

What is a fiat currency?

A fiat currency also referred to as "traditional currency," is a form of money created, backed, and centrally managed by an established government. A government decree that sets a ceiling on the value of coins and banknotes makes them legal tender. In most cases, a central bank manages the fiat currency, which is not backed by any physical assets like gold or silver.

Changes in the value of a fiat currency are governed by demand and supply forces, which are influenced mainly by how dependable and stable the government that produces the currency is. Therefore, a government must actively promote and effectively manage its currency via healthy financial and economic decisions.

Generally, a fiat currency does not in itself have an intrinsic value. A commodity's intrinsic value is defined as its actual value within itself without considering its market or face value. A commodity like gold, for example, has an intrinsic value because it can also be used for other purposes aside from being a medium of exchange. This explains why the fiat currency relies on demand and supply.

When you purchase a commodity, it has a value similar to the value of the fiat currency used to buy it. This value must be stored to be traded in the future, but if the commodity becomes limited in supply, the increasing demand corresponds to an equal increase in its value. Therefore, the amount of fiat currency needed to acquire that same commodity would have increased. This explains how fiat currencies are valued and will help you understand how digital currencies like Bitcoin work.

What determines the value of Bitcoin?

Bitcoin, currently the most popular cryptocurrency, is built on blockchain technology. This technology ensures all transactions are digitally recorded in multiple blocks such that each Bitcoin transaction can be viewed by everyone but cannot be modified or overwritten. The blockchain establishes a global network of users and a digital ledger for recording financial transactions without the involvement of intermediaries like banks and governments.

Due to its decentralized nature, bitcoin lacks any inherent value. Therefore, the user's faith in the currency is the only basis for establishing trust; if that faith is lacking, it will be difficult to have any trade value inside the network. However, the system has proved itself trustworthy over again since its launch in 2009, with the help of super-secure blockchain technology. The determinants of Bitcoin value can be discussed from a variety of angles. Of course, one could easily argue that the market price of Bitcoin determines its value. But that doesn't answer our question. Let's delve deeper into some of the significant characteristics that make Bitcoin valuable.

Utility

The ability to transfer large amounts of funds swiftly and conveniently without needing an intermediary or third party is the first clear advantage of using Bitcoin. It is becoming gradually accepted and utilized across many businesses and countries, resulting in an increase in its value. In addition to trading the digital asset, the token is now widely used to pay for services, make purchases of actual goods, and even place bets on sporting events, as it ensures security and doesn't incur charges. Many bookmakers, including Parimatch, allow funding and payment in Bitcoin, speeding up transactions and enhancing the security of funds and personal data. When you go to Parimatch to place a wager on your preferred game, you also benefit from the odds and guide offered on the site, such as parimatch Dota 2 odds. Although some other networks also enable the fast transaction of large amounts, Bitcoin remains the biggest, most well-known, and most secure.

Scarcity

There is a limited quantity of Bitcoins. With the basic structure capping the number of coins at 21,000,000BTC, there won't be any Bitcoin available to miners until about 2140. Analysts have noted that because Bitcoin is rarer than other traditional currencies or commodities such as gold, it is more valued and will soon reach its maximum number of units in circulation. Therefore, Bitcoin prices increase due to greater demand because there are fewer units available, and the number of its users keeps growing. 

Decentralization

Direct Bitcoin transactions are rapid, traceable, transparent to the public, and immutable because of the currency's decentralized architecture. The blockchain tech on which Bitcoin is built is a highly secured and decentralized one, where protocol upgrades and transaction validation are subject to network-wide consensus, shielding the currency from any misuse or mismanagement on the part of a single individual.

Security

Bitcoin's blockchain security makes it difficult to hack into, which is one of the most valuable features of the currency. By allowing as many participants in distribution as is practical and making all transactions public, the overall security of blockchain technology is way higher than any other financial system. You can rest assured that your transactions are protected from risks common with traditional transactions, such as hacking, phishing, theft of personal data etc. This makes it trusted and utilized by many prominent businesses and investors, leading to an increase in its value.

Conclusion

The value of Bitcoin is significant to traders and investors. Its utility, scarcity, and decentralization are some of the reasons for the currency’s value. However, it is mainly down to demands and supply. Visit Parimatch for an exciting betting experience.