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What is the fundamental value of bitcoin?

BingMag.com What is the fundamental value of bitcoin?

Given the recent record-breaking of bitcoins in reaching new price highs, there are many predictions that the price of this cryptocurrency will reach $ 100,000 and even more. They promise. These forecasts are often based on current trends and made by people with this logic who believe that the price has been Saudi until now, then it should go up.

Of course, there are technical analysis and charts. . Many use the patterns on the charts to predict the future of currency currencies. If you are a little familiar with financial markets, you must have heard terms such as technical analysis, resistance zone, support, indicator and fundamental analysis.

In this article, we are going to ask the question whether bitcoin has fundamental value?

Calculating the underlying value

"Underlying value" is a traditional financial term that means the value that is generated based on the return on investment of an asset. Consider an apple tree. For an investor, the core value of this tree is in the apples that bear fruit and are the product of this tree. The share goes to the investor. A standard criterion common among investors is the price-to-earnings ratio. More comprehensively, the fundamental value reflects the profit that the shareholder or investor will receive from the purchase of the stock in question. Production of electronic products is considered. But this fundamental value is not the reason most people buy this precious metal.

The fundamental value in the world of cryptocurrencies

BingMag.com What is the fundamental value of bitcoin?

National currencies are very different from the currency code. The fundamental value of national currencies depends on their reliability and acceptability as a currency. In the past, coins were made of precious metals such as gold and silver; Because it was possible to melt them and turn them into a precious metal. But now this is no longer the case for Fiat (government-sponsored) currencies, and their value depends on how much people trust the acceptance of one currency by others.

Most cryptocurrencies, such as Bitcoin, Ether and Dodge Quinn is a kind of private fiat currency. These currencies have no corresponding assets or profits, making them difficult to calculate their underlying value.

In September, analysts at the British Standard Chartered Bank noted that bitcoin could reach a price cap by the end of 2021. It has $ 100,000. "As a currency, bitcoin can become a one-to-one payment method for a world without a bank account and a cashless future," said Jeffrey Kendrick, head of the bank's currency cryptography research team.

Mr. Kendrick's prediction is theoretically plausible. About 1.7 billion people worldwide do not have access to banking services, but Bitcoin has been the future payment method since its inception in 2008. Of course, there has been little progress since then.

There are at least two important factors against this popular currency code: first, payments must be processed by computers, and second, which is more difficult. The price of this currency fluctuates.

Digital currencies that can have a fixed value will have a better chance of becoming a payment instrument. These types of currencies include stable coins, projects such as Diem Meta (formerly Facebook) and digital currencies of the central bank, some of which are currently used in the economies of the Caribbean.

BingMag.com What is the fundamental value of bitcoin?

Tesla has so far been the only major company to accept Bitcoin as a payment method. The only country that has accepted bitcoin as its official currency is El Salvador, which also uses the US dollar. Of course, the economic benefits behind the decision of El Salvador President Najib Bukla are not clear, but the country's laws forcing businesses to accept bitcoin have led to protests.

Bitcoin as digital gold

If Bitcoin as a common payment method has no real value, can it be viewed as a valuable reserve, like digital gold? Bitcoin has the advantage over most altcoins (other cryptocurrencies) that it is very popular among the people and beyond that, like gold, it has limited reserves.

One of the tools that fans of cryptocurrencies from It is used to compare bitcoin to gold, called the Stock-to-flow model. In this method, it is said about the stability of the value of gold that the available stock of gold is 60 times more than the amount that is extracted every year. The existing stock of bitcoins is 50 times more than the coins that are mined annually.

BingMag.com What is the fundamental value of bitcoin?

but this The method can not explain why the price of bitcoin has halved at some point this year. Even this model has no theoretical basis in economics: prices are not just dependent on available reserves, and there are many other factors involved.

For example, 5% of their assets will be invested in Bitcoin, predicting a higher price for this currency. But these kinds of predictions assume that Bitcoin, as the largest and most well-known cryptocurrency, will continue to dominate the cryptocurrency market; If there is no guarantee for the realization of this view. Especially considering that there is no limit to the number of altcoins.

BingMag.com What is the fundamental value of bitcoin?

Bankcard A credit card company, it owned 90% of the Australian credit card market in the early 1980s, but ended in 2006 with the rise of Visa, MasterCard and the like. p>

Remember the MySpace social network? Prior to 2008, it was the largest social network, but declined as Facebook grew in popularity. Therefore, there is no guarantee that Bitcoin will remain the cryptocurrency of the market.


In September, The Economist argued that Bitcoin now has competitors such as Ether. (Atrium Blockchain Password) which has reached a significant volume is a deviation from the future of decentralized assets.

  • Update Atrium 2.0 is on the way; Can Ether take over Bitcoin?

There are similarities between the Bitcoin bubble and the .com bubble in the first decade of the new century; Both grew with optimistic predictions about new technologies and, of course, human greed.

As limited stars like Amazon emerged from the .com bubble, some applications of blockchain technology under the Bitcoin network may have sustained use. , But the Bitcoin currency code is unlikely to be one of them.

  • 10 countries that have banned or restricted the currency code

Source: The Next Web

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