Bitcoin works as a financial system, it was created by Satoshi Nakamoto in 2009 (a programmer who used) that pseudonym without really knowing who it is). Bitcoin does not belong to any company or government, however, every day that passes, it gains more support globally (so far it has not been considered by a country as legal tender).
However, Bitcoin is already beginning to take part in existing legal reserve in some parts, as happened recently with a ruling from the Court of Justice of the European Union that determines that Bitcoin is exempt from VAT in European territory since 2015. Enter The most frequently asked questions about this cryptocurrency are: Why does its price fluctuate constantly? What influences the determination of its value? How stable and safe is that price? Next, we will answer each of these questions in a summarized way.
Is money the Bitcoin?
We can understand as money everything that allows its use as a means of payment for a service or a good provided, and that, in turn, that money serves as a unit of accounting account and also as a deposit with value, among many features. It must be taken into account that if that money is not accepted as a payment mechanism, it has no value.
FIAT money (official money such as euros or dollars) would not circulate as bills or coins if it did not have the value it has. In this case, the FIAT money is endorsed and certified by its respective financial system, however, this does not necessarily mean that it is the best alternative for the end user (as we saw in our previous article where we explain why Bitcoin has better properties than FIAT money or fiat money issued by governments or banks).
Who determines the price of Bitcoin?
The price of the Bitcoin currency is determined by those who participate in the process of buying and selling, that is, in the supply and demand of users. This is mainly what determines its value, although, obviously, other factors such as user confidence and the number of transactions made influence. When trading with Bitcoins, distribution occurs and benefits are generated, as in other cases, for example, producers propose a price and buyers propose another price, it is discussed and agreements are reached, in this way the value is determined of good or currency.
The value of Bitcoin has been changing over time, and this is based, as we said before, on the confidence that users give in its usefulness and popularity. For example, in 2010, the value of Bitcoin was less than one cent of a euro, since it doubted its safety, efficiency and, above all, its acceptance in the cryptocurrency market. This method of determining the price through the process of buying and selling is similar to what happens with other legal tender.
How often does Bitcoin change its value?
The value of a Bitcoin changes or fluctuates every second, the same can happen with stocks, with precious metals and even with food. We are in a dynamic world where prices change constantly (although we don’t realize it), because in many cases there is little dissemination of this information.
As Bitcoin is a currency that belongs to a decentralized system, it is not controlled by governments or banks, so it can give the appearance that “it has no support” from the financial point of view, however, it is safer than money FIAT since it does not have its deficiencies: hyperinflation, poorly transparent distribution and inorganic production. In fact, Bitcoin is precisely created as a solution to these problems that are characteristic of the financial system based on FIAT money. The question is, if there is no reliable authority, who determines the price? The answer is that the price is determined by ourselves, the market members who buy and sell Bitcoin instead of the local currency.
What do you think about this topic? Is it clear to you where the value of bitcoin comes from?
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