The Bottom Line Like all forms of currency, Bitcoin is given value by its users, supply and demand. As long as it maintains the attributes associated with money and there is demand for it, it will remain a means of exchange, a store of value, and another way for investors to speculate, regardless of its monetary value.
What are the economic forces of Bitcoin?
Bitcoin acts as more of a commodity being used to store value, so the following factors influence its price: The supply of bitcoin and the market's demand for it. The cost of producing a bitcoin through the mining process.
What is the motivation behind Bitcoin?
The motivation behind Bitcoin's creation Bitcoin was developed as a revolutionary response to the 2008 financial crisis, which revealed the inherent fragility and limitations of the traditional banking system.
What economic problem does Bitcoin solve?
The economic problem that Bitcoin solves is the double-spending problem. The double-spending problem is a generic problem for any payment system. As the name suggests, a double-spend is an instance in which a user spends the same unit of currency twice.
Who controls the value of cryptocurrency?
Because cryptocurrency is not regulated, several factors affect its value, including demand, utility, competition and mining. The cryptocurrency market can be volatile -- sometimes reaching record highs and other times dropping significantly.
What does Bitcoin classify as?
Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. Is Bitcoin a commodity? Yes, virtual currencies, such as Bitcoin, have been determined to be commodities under the Commodity Exchange Act (CEA).