How is the value of a substance decided?
The action figure shown in the above photo is of a storm trooper, one of the most popular characters from the star wars universe. Now let us imagine that the price of such action figures to be $20 a piece. Being a popular character, almost every major toy stores in the world will have such action figures in their stock.
Now Star wars being a popular brand has huge fan following all around the world. Action figures like these are in high demand all around the year. Now when a new movie of this franchise is released, the craze amongst the fans increase, and the demand for such action figures also increase. As long as the supply of this item meets the demand, the price of the item will remain $20. If the supply increases, the price may drop. Now in case, the supply decreases, but the demand keeps on increasing, the price of the commodity will keep on increasing as long as there is no alternative available in the market. This is because, for every person out there who is willing to pay $20 for this item, there might be 2–3 more people who are willing to pay much more than $20 dollars because they might feel that the value of the commodity is way more than $20.
For the same reason as mentioned above , Gold and Diamond are considered to be valuable commodities. We value gold because of its storage value. Being a noble metal, gold can stay in an un-oxidized state for thousands of years.
The same concept can also be applied to Bitcoin as well. Initially, people started investing in it because they were able to transact amongst themselves without the need for a bank at very low transaction fees. This resulted in more and more people to adopt this currency. But since Bitcoin has a limited quantity, the price started rising when the number of users also started rising, till it reached $1000 when people started thinking of it as a good investment opportunity and on December 2017, the value of a single Bitcoin crossed $ 10000!
Personally, I feel than Ether will eventually take over Bitcoin as the dominant form of cryptocurrency as it is backed by a technology known as smart contracts rather than the only value that people give to it. But for the next 5–6 years Bitcoins will remain as the major player.
If you want to know more about supply and demand, read my article “Diamond vs Water – What do you wanna be?” on pulse.
Resources to get started with Blockchain Technology
Must haves in your collection (Even if Blockchain technology is just a hobby for you)
- Blockchain Revolution: How the Technology Behind Bitcoin and Other Cryptocurrencies is Changing the World
- The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology
Other resources
- Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics
- Learn Blockchain technology free of cost
I really don’t know much about Bitcoin but with this am now enlighten. Thanks.
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You have done a great job explaining Bitcoins.Your explanations have answered a lot of the questions that were unknown. Good job!!
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Hm, I definitely learned a few things about bitcoin, so thanks for that!
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I learned a lot from your article…I had no idea what Bitcoin was. This was definitely a good read!
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I’ve heard a lot about bitcoin lately, but would have to do a lot of research before considering investing in it.
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I have to admit I was not familiar with the ins and outs of Bitcoin at all unti now!
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I definitely learned a few things about bitcoin. Good read!
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Good to know about bitcoins. Thanks for sharing such an informative post.
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we are very very new to this topic! so much to learn!
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This is such an informative post and I have learnt so much now about bitcoin. Interesting post.
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Crypto is very interesting but hard to understand, it’s cool to have this resource at my disposal to learn more. Thanks!
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How interesting – I’ve heard this word floating around here and there but had no idea what it was until I read your post. Thanks – hope you continue to educate!
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I have heard so much about Bitcoin but honestly it does make me very nervous to invest in something like this. The fact that you seem more invested in another cryptocurrency, the whole thing seems too insecure to feel safe in investing in it.
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I have the hardest time understanding Bitcoin. This was really helpful info as I continue my research!
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Until there are enough real time banks to back bitcoin, it’s the time I would take this new technology seriously. The technology is promising, though .
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I don’t know too much about Bitcoin other than via a segment on the show Dark Net. It was truly fascinating to see who was using it and why, as well as where they store the servers and how they move them around.
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I’ve learned that I can rely on your posts for timely, relevant, USEFUL information. Very cool. Thank you.
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Great article. This is a topic I know I need to learn more about and you really helped me understand some good ways. Thank you.
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I have tried hard to understand what Bitcoins are exactly but have always failed to. Loved reading your detailed article. It’s definitely insightful 🙂
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I really don’t trust bitcoin right npow as it is unstable and a new currancy. I wait 10 years.
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Great Article. I was able to understand what bitcoin and looking forward to your next article regarding blockchain.
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Very interesting knowledge about bitcoin and the price plus costing. Still I find it quite intriguing. Thanks for generously sharing your knowledge.
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I had heard about bitcoin but I ‘d never gone into the details. Reading this article gave me some insight into the technology.
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I had heard about bitcoin but I’d never gone into the details. Reading this article have me some insight into the technology.
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Wow, this is interesting to know about Bitcoin and now I have an idea about Bitcoin well written!
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What an interesting post
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