Economics of Bitcoin | How Does Bitcoin Have Value? - YouTube

so bitcoin recently hit a new all-time high  of 69 000 on november 10 2021. now according  

to coinmarketcap.com there are now more than  14 000 cryptocurrencies at the time of making  

this video but if that's the case what keeps  bitcoin at the top of the list and what gives  

bitcoin its value is it just a speculative bet or  actually a sound investment hey everyone my name  

is dexter and thank you for joining me if you are  new to this channel i talk about personal finance  

investing and financial technology so if you want  to learn more about these topics please consider  

subscribing so you get notified when i come out  with new weekly episodes in today's episode i'm  

going to be diving into what might give value to  bitcoin or in broader terms what gives value to  

anything so let's get started in the world of  economics in order for something to have value  

it needs to provide utility and possess scarcity  so what exactly does that mean well to give you  

the standard economics 101 textbook definition  utility is basically the level of satisfaction  

you get from consuming a good or service while  scarcity just means that there is a limited supply  

of that good or service now we see this concept of  utility and scarcity in virtually all parts of our  

lives allow me to demonstrate when you're at home  you're probably getting a level of satisfaction  

from having running water which enables you to  stay hydrated take showers flush the toilet and  

let's not forget wash your hands and you might  also get a level of satisfaction from using  

electricity to power your computer smartphone  appliances and to literally keep the lights on  

this level of utility you get from consuming  these services can therefore be directly  

translated to your demand for these services and  thus the price you're willing to pay for them now  

wouldn't it be hilarious if they called the price  you paid a utility bill well spoiler alert they  

do well all jokes aside you're probably waiting  for me to get to the point of why this relates  

to bitcoin and why bitcoin might have value now  when we talk about investments this same concept  

of utility and scarcity still applies of course  with the added feature that with an investment  

you're anticipating that the future value of that  investment will be worth more than what it is when  

you bought it in other words you're willing to  make the trade-off to defer your utility today  

by investing your money with the potential that  the future value of your investment will at least  

preserve or increase the purchasing power or  utility of what you can enjoy in the future  

just look at some common investments like stocks  gold or real estate they all have limited supply  

and provides some level of utility or perceived  utility that directly translate to the supply  

and demand that result in the market price  that people are willing to pay for them  

stocks provide utility because they are units  of ownership in a company that produces revenue  

and maybe a product that enables an investor to  sell their stock for a higher price and maybe  

even get a dividend gold provides utility  through its use in electronic components  

as jewelry and a store of value to hedge against  the depreciation of fiat currencies real estate on  

the other hand provides utility because you  can live in the property get rental income  

wait for the property to appreciate and value and  potentially sell it for a profit so how does this  

relate to the value of bitcoin well just like the  common investments i just mentioned bitcoin also  

follows the same principle of utility and starcity  that drive its real-world supply and demand  

because there is scarcity built into bitcoin there  is a finite supply of 21 million bitcoin that will  

ever be created while in terms of utility bitcoin  number one serves as a decentralized global store  

of value for digital money because it isn't owned  by any single country and is capped in supply  

its purchasing power isn't eroded in the same  way fiat currencies are with money printing  

that result in currency inflation that drives  up the price levels for goods and services  

and number two bitcoin is seen as an investment or  speculative instrument which is purely dependent  

on the intent of the purchaser of the bitcoin  you can either huddle it for the long run or  

for some trade on the volatility that still exists  today and number three bitcoin acts as digital  

property without an intermediary this means that  bitcoin enables you to custody your own bitcoin  

so you can store send and receive bitcoin without  high transaction fees and foreign exchange costs  

that you might have with a traditional financial  institution if you're sending money overseas and  

number four bitcoin allows you to pledge your  bitcoin as collateral being a digital property  

you can borrow money against your bitcoin or other  digital assets to get a lower interest rate or apr  

through platforms like block fi celsius coinbase  or nexo compared to what you might pay if you  

take out an unsecured loan that relies solely on  your credit score and lastly number five bitcoin  

enables you to earn passive income in the same  way you can borrow money against your bitcoin  

you can also deposit it on the same platforms of  block fi celsius coinbase or nexo to earn interest  

income that is paid out in additional bitcoin  to your account isn't that awesome if you're  

just beginning to learn about bitcoin i made an  episode called bitcoin explained that breaks down  

the economics and underlying framework about the  technology of bitcoin which you can check out and  

i'll leave a link in the description below hey  guys just a quick disclaimer this episode is  

solely for entertainment purposes and if you  are considering making any investment please  

seek professional financial and investment  advice bitcoin is a volatile asset class  

and there are risks involved so please do  your own research before making any decision  

in conclusion bitcoin does appear to have  real world value bitcoin's utility comes  

from multiple factors where you can think of  bitcoin like the swiss army knife official  

value because different people view it to have  different use cases like being a store of value  

being an investment being a digital property  being currency or being digital gold another  

way to think about it is to just compare bitcoin  to the currency in your own country has bitcoin  

appreciated in value against your currency in  what you can buy today or the other way around  

just think about it at the time of making this  video if you have won bitcoin today global demand  

shows that someone out there in the world is  willing to pay you 60 000 for your bitcoin  

and the transaction can be settled in a matter of  minutes pretty cool huh and as always guys if you  

feel like you've gotten value from this episode  please consider subscribing to this channel  

hitting that thumbs up button and ringing that  bell icon as this will help this message to get  

out to more people like yourselves until next time  my name is dexter and have a wonderful day bye

and number four bitcoin allows you  to pledge your bitcoin as collateral  

being a digital property you can borrow  money against your bitcoin or digital

oh gosh