The average cost of a bit continues to fluctuate at fairly extreme levels, which has helped ensure that financial experts take Bitcoin as a serious investment product. These volatile prices have also made it so that some people don’t consider BTC a legitimate currency no matter how valuable it might be. If Bitcoin were the same kind of money you fold up and put in your wallet, then it would suffer from some of the most extreme deflation in history.
Risks Associated with Fiat Currencies
Due to these issues, it can be difficult to calculate the actual purchasing power that a single Bitcoin holds. When experts attempt to figure out these numbers, they have to keep in mind that fiat currencies fluctuate as well. No hard currencies in the world are based on the gold standard any longer.
Unlike hard currency, it can be difficult and expensive to convert Bitcoin into dollars and cents. This means no one can explicitly say that one block chain has a specific real-world worth. You’re actually looking at trade values whenever you see monetary figures online. These values are closer to the prices of securities than they are the exchange prices of different currencies.
Any cryptocurrency including BTC is only worth whatever others are willing to pay to purchase it, which means that these values aren’t necessarily always completely accurate. Wise Bitcoin traders can actually get lower entries prices into the market by taking advantage of this fact.
Finite vs. Infinite Currency
No matter how many blockchain applications are mining a block, there’s always a finite amount of Bitcoin. This makes the issue of inflation a moot point. Investors feel that since there is a finite amount of coins to go around, there is no reason to believe that the cryptocurrency won’t peak and then start to decline in value.
Central banking authorities can always issue more currency if needed, which makes hard currency a theoretically unlimited resource. Bitcoin may not suffer from inflation the same way that hard currency does, but it lacks some flexibility as a result. We’re not at the point where you can simply walk into any store and use cryptocurrency to buy groceries. That being said, we’re actually fast approaching a scenario where that might be the case. This will take even more of the advantages of infinite currency away when it comes to calculating value.
Calculating the Real Value of BTC
Security measures like P2P private key texts and signature files may keep Bitcoin private, but the fact remains that calculating popularity isn’t difficult at all. With experts loving to parade around the nearly 1000 percent growth over the last year or so, it almost seems like calculations about the value of the cryptocurrency isn’t all that important for those who view it as an investment product.
The one thing that might make such calculations easier in the future is the fact that the CBOE, CME, and Nasdaq are publishing the full financial details of their cryptocurrency futures. These releases might make it easier to figure out how much money someone could get if they wanted to convert their BTC blocks into cold hard cash.