Whether you like it or not, the cryptocurrency boom continues. Also, their popularity is growing. At the same time, bigger and bigger players are entering the market. However, you have probably asked yourself many times: what is the strength and value of Bitcoin (BTC) or Ethereum (ETH). In this text wee will try to explain it to you.
In recent weeks we have started to live in really interesting times. The economic crisis has begun. Fortunately, we have wise and responsible politicians who know what to do now… Well, this is where the problem begins. Looking at the next decisions that are made at the level of central banks and governments, one can have concerns about the future — especially the future of our money.
The cryptocurrencies will only now show us their value
Surely, many of you still remember the crisis of 2008. The banking system was shaking in its foundations. The authorities introduced quite unusual regulations then according to which banks could bail out the savings of wealthier clients that had been deposited with them. Worse still, these laws still exist today.
Why are we writing about this? Because it’s the first step to knowing what Bitcoin actually is. You’re the only one in control of your resources with the crypto. You can deposit them on the stock market, but you can keep them on a wallet that only you have access to. So no bank or government can lay a hand on them. But that’s not all…
Let’s go back to the current crisis. Governments and bankers are printing money on a massive scale. They think that they can stave the crisis off this way. Sure enough, in the short term they will help their citizens who, for example, are unemployed. In such specific cases it could all make sense. Regrettably, however, in the USA, for example, every American (except the millionaires) gets 1000 dollars. It amounts to nothing but pumping the markets with empty money. How are we supposed to trust the currency in our own wallet, if we have no control over its supply and we see this crazy printing of money with our own eyes. According to economics 101, the aforementioned can lead to inflation which is a price spike for real products.
Bitcoin is different. From the very beginning we know that its supply is limited and we even know the process of its issuance. We know that, for example, already in May this year, the number of new Bitcoins to be launched on the market will be reduced by 50%.
Cryptocurrencies therefore have an advantage over the dollar, euro or yen. They are independent from governments and have a limited supply. These are features that encourage investors to invest in BTC.
Ethereum
Bitcoin is often called “Internet gold”. Another cryptocurrency, Litecoin, was at one time referred to as “silver”. But what exactly is Ethereum, which is often mentioned in one breath with BTC? It’s a platform for generating smart contracts. Ethereum is a kind of automated contract between two parties. Yes, only two. There’s no need to ask for a lawyer. In a world where smart contracts are common, it would be simpler and cheaper to conclude sales/rent agreements or repeatable bets.
The core of Ethereum is the Ether token. You can invest in it on stock exchanges. To use smart contracts at all, you need Ether tokens so it is probably obvious that if the idea promoted by Ethereum becomes popular, people will also start buying tokens more often. Thus their prices will rise. Besides, Ethereum can also be used as money the same way as BTC.
Bitcoin and Ether
So we have two models: BTC and Ether tokens. Bitcoin is a currency and a kind of safe haven for times of crisis. A comparison to gold (albeit in a digital form) is appropriate. Behind Ether, however, there is a platform for smart contracts. We invest in these tokens as a new technology and it’s effectively much like buying Internet shares in the 90s.
Hopefully this article has explained successfully where Bitcoin’s and Ether’s value comes from. Note, however, that the crypto market is large. With the growing popularity of these two, there will also come a series of systems for buying e.g. WeeMAT tokens. According to a famous saying: invest when it’s quiet and sell when it’s all about the asset. Today we only hear the first whispers in the crowd…
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