What Makes Bitcoin Valuable?

There's no denying that bitcoin's price is volatile in the short term. It is a byproduct of its status as an emerging asset class. However, look at the long-term valuations of bitcoin and examine the fundamentals behind its year-over-year exponential growth. We can review five key characteristics that make Bitcoin a valuable asset.

1) Fixed Supply

Bitcoin is incredibly scarce. While bitcoin's supply is steadily increasing through the mining process, there will only ever be 21 million Bitcoins ever to be created. There is no central entity that can alter the supply cap, unlike most fiat currencies.

2) Portability

Bitcoin is massively more portable than gold. Transferring Bitcoin from one wallet to another can be as quick as sending a text message or an email. You don't even need a centralized third party like VISA to validate the transaction. Bitcoin nodes (thousands of computers scattered across the globe) automatically do the verifying on the network. And with the advent of decentralized internet satellites and smartphones, making a transaction or holding Bitcoin is a possibility anywhere in the world.

3) Security

From mining to transactions, Bitcoin uses powerful SHA-256 encryption, which keeps the network secure. It also uses an adjustable consensus algorithm called "proof-of-work" to protect the network from malicious attacks.

When it comes to holding your bitcoin, using best practices with your Bitcoin address or wallet is an immensely secure way to store value. Various Bitcoin wallets can provide multiple levels of security. Still, if you own the keys to your bitcoin wallet, you become the bank account, bank, and bank CEO of your bitcoin. Remember, "not your keys, not your coins."

4) Improvability

Bitcoin is programmable money. Bitcoin miners that make up the network must achieve consensus to upgrade the back-end programming of Bitcoin. No single centralized entity can make this call. The latest update to Bitcoin, known as "Taproot," will add new features to the network, such as increased privacy, network efficiency, and the ability to utilize smart contracts such as decentralized finance applications.

5) Censorship Resistance

Bitcoin cannot be censored. Modern-day censorship typically involves payment corporations such as VISA or PayPal closing the accounts of individuals of their choosing. Anyone can receive BTC transactions with the Bitcoin network, and no central authority can feasibly prevent them from doing so.

When you examine the fixed supply, portability, security, improvability, and censorship resistance, our opinion is that these characteristics add clarity to why the value of Bitcoin increases year over year. And when you compare Bitcoin to the nature of other assets, it becomes even more apparent. Microstrategy's Michael Saylor makes this point:

This article, along with all content and opinions from BTC Examiner, is for educational purposes only and is not financial advice. Please reach out to your independent financial advisor before making any investment.