Amidst a series of turmoil caused by China's decision to completely ban cryptocurrency mining in its territory, the price of Bitcoin continues to fluctuate. If at the beginning of the week the virtual currency lost 10% of its value, this Tuesday 22/06/2021 it was worth less than US$ 30,000 per unit for the first time since January this year.
But wait then, What is the fair value of the Bitcoin then?
The future of currencies is digital and crypto is simply a particular way of operating a digital currency, also the Bitcoin is one of the thousand of crytocurrency available out there.
Let´s think about this a little, a USD 100 bill so called the "Benjamin" or "Benny" is perhaps the most known object on the World, from Patagonia to the Desert of Sahara everybody nows it (unless you have live all your life in a cave).
The "Benjamin" is only a good quality paper with a special ink, then a 6mm wide 3-D security ribbon is woven into the paper. Tilt the note back and forth while focusing on the blue ribbon and Voila! we have created value worth USD 100.
Question: Is it really worth it? Well, I guess so because someone will accept it.
So going back to the Bitcoin price, The price is determined by the Supply and Demand but ultimately is what in Economic called "Willingness to Pay"...Willingness to pay (WTP) is the maximum price at or below which a consumer will definitely buy one unit of a product. This corresponds to the standard economic view of a consumer reservation price and also it can be a range and in the case of the Bitcoin the range is very ample.
Determining the price of any Asset Class is difficult, Commodities like Gold, Oil, Silver are somehow stable however try to value Coltan, Uranium or other less known minerals.
Also try to think the value of the Monalisa, The Burial Mask of Tutankhamun, The original Constitution of the USA, etc...you get it right?
The Bitcoin brought the concept of Blockchain and this is important as no one centralizes the information, decentralized blockchains are immutable, which means that the data entered is irreversible. For Bitcoin, this means that transactions are permanently recorded and viewable to anyone. The goal of blockchain is to allow digital information to be recorded and distributed, but not edited and this is different from minting coins and printing paper to "create" currency from the Governments.
Whether we like it or not. Blockchain is here to stay, perhaps Bitcoin is the welcoming mat to this amazing concept...