How is Bitcoin value derived

Governments all over the world intervene in the money markets with one overriding aim – that is to keep their currencies stable.

When supply is more than demand, the Central Bank might step in to mop up excess liquidity from the markets to prevent the currency from rapidly losing value and vice versa.

This stability creates confidence in the minds of consumers and businesses utilising the currency.

Because there is no Central Bank doing the same for Bitcoin, the value of Bitcoin is left entirely to market forces (and speculative activity). Unfortunately, this also causes massive fluctuations in the value of the currency.

How many Bitcoins are there in the world?

The total number of bitcoins will eventually converge to 21 million in the year 2140.

At the point of writing, 16,612,000 Bitcoins are in circulation. The latest number of bitcoins in circulation can be monitored here: Bitcoins in Circulation

If there is an indefinite amount of a commodity in the world, the value of that commodity would decrease. Rarity creates value. It might help to think of the Fed printing money as devaluing the US dollar.

Hence there must be a cap to the total number of bitcoins in existence, and a pre-determined schedule allows that.

Bitcoin gets harder to mine as the supply increases. The current block of bitcoins is 12.5. Every 4 years, the block of bitcoins reduces by half

Many other digital currencies are created to overcome the limit in Bitcoin supply. There are 1128 digital currencies now, and Bitcoin makes up 48% of all cryptocurrencies.

How is Bitcoin value derived
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