Every coin has its value. Even if it’s not US Dollars, gold or some other precious metal, a coin holds value. Where is the value of Bitcoin?
Just like the precious metals, there are a lot of ways to determine the value of a coin. The most popular way is based on the historical price and volume of the coins available. The objective of the design is to show how the market has fluctuated since its introduction. The historical price is determined by using “technical analysis.” You should consider many factors such as supply and demand, the central bank influence, and the general popularity of the coin. If you use this method, you will be able to determine the value of the market.
By definition, if something is both rare (a rarity) and useful (utility), it must have a value and ask for a specific price, all other things being equal. Like gold, Bitcoin is also rare: its supply is limited. Bitcoin supply is impacted in two different ways. First of all, the Bitcoin protocol allows you to create new bitcoins at a fixed rate. New bitcoins are introduced to the market when miners process blocks of transactions, and the rate of introduction of new coins is designed to slow over time: growth has slowed from 9.8% (2015) to 6, 9% (2016) to 4.3% (2017).
This can create a scenario in which the demand for bitcoins increases faster than the supply, which can drive up the price. The second impact on supply is the number of bitcoins the system allows for existing. This number is capped at 21 million, which means that once this number is reached, mining will no longer create new bitcoins. At this stage, mining will likely be borne by transaction costs. However, to be valuable, Bitcoin must also be useful. Bitcoin creates a utility in several ways. Like gold, Bitcoin is perfectly fungible (one bitcoin is similar to another), it is divisible (you can pay someone a small fraction of bitcoin if you wish) and easily verifiable (via blockchain).