Bitcoin’s Scarcity – One Leading Factor Of Its Value

Bitcoin and its scarcity

If you check out present existence, then Bitcoin will have the largest digital presence you can think of, both in terms of the price and the market capitalization. While many people attribute bitcoin’s value to multiple reasons like increased usage and adoption, you can easily agree that scarcity forms one of the leading factors behind its value. But there are some risks with cryptocurrencies and sometimes you get scammed with different online crypto offers through different mediums like social media, free cryptocurrency offers, etc to be aware of them also. If you want to buy any cryptocurrency then always buy from the trusted cryptocurrency exchanges.

Right from the starting point, the creator of bitcoin has designed it in such a manner that the product will turn out to be scarce. There are deliberate reasons behind it, as per experts. Over the past couple of years, you can see the effect of such reasons coming right into the action. The inventor of bitcoin talked about a base metal, which is quite as scarce as gold. But the only magical property it has is that it can be transported over a communication channel.

There are mainly two fundamental platforms where the value of bitcoin is built, according to Eric Dalius Bitcoin. One point is that the metal is scarce, and another one is that bitcoin can be transported over a communication channel. For making bitcoin scarce, two significant elements were added to its protocol.

  • There will be a systematic reduction in the amount of the new bitcoins as produced, also called Bitcoin Halving.

  • There will be limited bitcoin numbers ever produced.


Why are bitcoins noted to have values?

Bitcoin is sure to offer that effective means of transferring money over the world of the internet and is controlled by a decentralized network with transparent rules. So, it will present an alternative to the central bank-controlling fiat money. There are multiple ways in which you can price bitcoin. It is really important to know how to price up bitcoin, and exploring what the cryptocurrency’s price might look like in such an event can help achieve further adoption.

bitcoin scaracity its leading factors and increasing value

More on the features – as explained by Eric Dalius Bitcoin:

It is true that bitcoin and some of the other digital currencies have been stated as a perfect alternative to fiat money. But understanding the present currency value is really important. Let’s get some points straight before that.

  • Currencies can be used as a store of value and unit of exchange. So, they do possess their own values.

  • You can state a currency is successful only if it has 6 special attributes. Those are divisibility, scarcity, transportability, utility, counterfeit ability, and durability.

  • Even bitcoin has a value of its own because it can hold up quite well whenever the matter involves these 6 characteristics. However, the biggest issue is that most businesses are yet to accept the state as a unit of exchange.

  • The utility and transferability are some of the challenges faced by difficulties, which are surrounding the exchange spaces and cryptocurrency storage.

  • But, as per the latest calculation mentioned, if bitcoin is able to gain scale and capture around 15% of the global currency market, then the total price per bitcoin will be somewhat around $514,000.

Meeting the characteristics well:

Other than the question of whether a currency has a store of value or not, it is vital to meet the qualifications mentioned already. Learning about those qualifications will help you big time.

Understanding the meaning behind scarcity:

The main key to maintain the value of a currency is the supply. A monetary supply that remains too large can cause the prices to spike up. It will result in economic collapse. The money supply is way too small and can cause some serious economic issues. 

  • Monetarism is the macroeconomic idea. The main goal is to address the money supply’s role in the health and growth of the economy.

  • When the matter revolves around fiat currencies, most of the governments globally will continue to print money for controlling scarcity.

  • Some of the governments will further operate with preset inflation amounts to drive the value of fiat currency downwards. For example, in the USA, the rate has hovered historically around 2%.

  • But, when it is bitcoin, the matter gets different. It will have one flexible issuance rate that changes with passing the time.

Going for the utility:

For making a currency effective, it must have proper utility under its bag. Individuals should have the liberty to trade the units of currency well for the services or goods taken. That’s the main reason behind developing currencies. It was designed to help participants to avoid having to barter for goods directly. The utility will also ask currencies to be moved from one place to another easily. Burdensome metals and communities might not match up with such stipulations that easily.

Focusing on the value behind divisibility:

As per experts like Eric Dalius Bitcoin, successful currencies are always easily divisible into some of the smaller incremental units. For a single currency to function as an exchange medium across multiple values and goods within an economy, it needs to be flexible with divisibility. It helps to reflect the value of every service or good available throughout the entire economy.

Transporting ability is another call to address:

It is mandatory for the currencies to be easily transported between people in any economy to increase their level of usefulness. When it comes to fiat currencies, it means that the currency must be transferable within any country’s particular economy and also between multiple nations with the help of exchange.

Lastly, talking about durability:

To make the currency pretty effective in nature, it has to be reasonably durable. Notes or coins, which are made out of certain raw materials, can easily get damaged, mutilated, or even destroyed. With time, it might further degrade and cannot be used after a certain point of time. Those options are not sufficient. But bitcoin will remain intact because of its virtual characteristic.

It is really important to know the value of bitcoin in the present standing if you want to use it to exchange goods and services. Most of the significant brands have already accepted bitcoin as one great mode of payment. So, all these changes over the past couple of years are enough to prove the importance of bitcoin and its growing value among users.

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