Bitcoin is a cryptographically secured digital currency that is held outside the jurisdiction of a central authority. Created in 2009 by a mysterious person calling himself Satoshi Nakamoto, the currency was originally intended to be used for payments that are not subject to government oversight, transaction fees, or delays in transfers - unlike traditional "fiat" (paper) currencies.
Back in 2010, Bitcoin was worth around 0.003 cents per coin. In October 2017, the price of the coin rose to $4,200 – although this value has been volatile, with frequent and swinging daily movements. Now, at the end of 2024, it has crossed the $106,520 barrier. In that time, hundreds of other cryptocurrencies have emerged, each with their own merits and applications. Few of these are particularly valuable, but Bitcoin has competitors in the form of Ether, Bitcoin Cash, and, to a lesser extent, Litecoin.
Commodity or currency?
Bitcoin was originally created as a form of payment, and in some specific cases it works exactly as intended. However, it lacks widespread adoption and is currently too volatile to be considered a true alternative to fiat currency: sellers need to constantly revise their prices to deal with the swings in value.
This means that Bitcoin is primarily used as an investment, similar to gold and other precious metals, rather than a traditional currency. Like commodities, the currency is beyond the direct influence of a particular economy, and is not significantly affected by changes in monetary policy.
Remember that while Bitcoin is not affected by many of the factors that affect traditional currencies, there are a number of unique influences to consider.
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