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The answer could be simple: despite many fluctuations, the price of Bitcoin is above 40,000 euros and is four times the price of a year ago. In reality, the price of Bitcoins is a puzzle for financial experts. For them, Bitcoins are very reminiscent of the legend of the hornet that could not fly as it would not respect the laws of physics. The thesis was put forward by the scientist Antoine Magnan in 1934 and was considered valid for a long time only to be denied by in-depth analyzes on the dynamics of the insect’s flight in 2005. It took seventy years to figure out an obvious…
Like the hornet, finance experts are scrambling to argue that there is no value in Bitcoin and that therefore the flight of its price would be completely inexplicable and would be nothing more than a sensational bubble destined to deflate. This thesis has been advanced for some time and yet the price continues to be high and has actually grown. If it is a bubble, its duration is rare.
To answer the question, it is worth asking what Bitcoin is.
Bitcoin is a digital “ object ” that has a dual nature: digital currency and digital asset.
In its essence, a Bitcoin is a sequence of bits (digital id) that is recorded in the blockchain by uniquely identifying the owner. The owner is also known in the form of a code. This is information known to all those who frequent the blockchain.
But why is Bitcoin worth over 40,000 euros?
Let’s review the two different hypotheses.
If Bitcoin is a digital currency then for us European citizens it should be completely comparable to a real currency like the dollar and the price of 40,000 euros would be nothing more than the Bitcoin exchange rate: to have a Bitcoin you need to pay 40,000 euros. On closer inspection, Bitcoin does not have the characteristics to be a currency.
Since it was invented, money has always had three characteristics: it must be a medium of exchange, that is, it must be accepted to exchange goods and services, it must be a store of value, that is, it must preserve its value over time and, finally, it must be unity. account with which the value of real financial assets, goods and services is measured.
Bitcoin does not have these characteristics. Except in very rare cases (such as recently El Salvador) it is not legal tender and therefore a merchant is not obliged to accept Bitcoin in exchange for his goods as is the case for the euro. It is not stable over time: to understand each other, a cup of coffee had more or less the same price after joining the euro, the same would not happen if we decided to pay in Bitcoin: its price could also have fluctuations of 50% in two months. Finally, being a unit of account presupposes that goods and services are also valued in Bitcoin – as well as in euros. A double currency that exists only in some countries subject to financial restrictions.
If it is not a currency then Bitcoin will be a digital asset that is a title (in this case a sequence of bits) that gives me the right to use some services / benefits. Here the discussion becomes more complicated as there is no prerogative that is unique to Bitcoin and therefore that justifies this interpretation. The only prerogative seems to be that of notarization. Since Bitcoin transactions on the blockchain are immutable, I can attach information to them to ensure that it is available and considered certain.
Faced with these considerations, Bitcoin has been compared to gold. Even gold has virtually no value except for its ornamental nature in some civilizations, yet it is a safe haven asset in crisis situations. The supporters of this thesis think that since the new issues of Bitcoin are less and less substantial and the quantity approaches its final consistency, the price discounts the so-called “ rare earth ” effect with the price that increases as the supply it is limited and people want to hold Bitcoin as a safe haven. It is an interpretation that can have its own meaning even if it must be remembered that gold represents a unique safe haven asset that is difficult to replicate.
Having reviewed the positions of the skeptics it remains to understand why the price of Bitcoin. A first answer is that Bitcoin is the frontrunner in the cryptocurrency field, it has the spotlight on it and this means that if Elon Musk decides to accept Bitcoins to buy a Tesla, its price will soar as it means that it approaches. become a currency (medium of exchange). A more articulated answer is given by the fact that there is a desire for a digital currency that bypasses (through the blockchain) the banking system and credit card circuits and that is universal without subjecting to the monetary policy decisions of a Central Bank (the quantity is determined automatically). It is difficult to determine if Bitcoin will be able to meet these expectations, but it is certain that they will fuel its value. Mind you, this is not the only proposal on the table. The attempt of Libra advanced by Facebook went precisely in the direction of creating supranational digital money, the euro and the digital renmibi are candidates to be coins issued by central banks but bypassing the banking system.
The world of money is in turmoil with innovations that could truly change its history. We will see some good ones.