Skip to content

Commodities | ETFs & Mutual Funds | Ethereum | Forex | M&As

Bitcoin

Bitcoin is not actually a coin that you would get as change from the store. It’s digital money. It’s something that exists online but not as a physical coin that you can see, touch, or keep in your pockets. One Bitcoin is worth around $62,000. But why?

Bitcoin is a cryptocurrency and was introduced in 2008 by an anonymous person or group of individuals using the pseudonym Satoshi Nakamoto. Where does it come from and who operates them? 

‘White paper’ 

A white paper is a document highlighting features of a solution. In this example, Satoshi Nakamoto proposed Bitcoin as a decentralized, peer-to-peer electronic cash system solution. In plain English, a system where Person A sends money online to Person B, without having a third party, like banks, involved. 

Balances of a bank’s clients are on the bank’s ledger without anyone having access to it but the bank itself. That makes banks centralized and non-transparent authorities. The idea of Bitcoin was to change both, make it decentralized and transparent, meaning, people can see all transactions ever made including the value of all transactions made by people, but they can’t see who sends money to whom and who owns how much. It’s a pseudo-anonymous system for users’ identities. While all transactions are recorded publically, user identities remain private.

We consider those public ledgers as blockchains. Instead of having one main computer in the bank that holds all the accounts and balances etc., we now have all the participating computers who use the blockchain system with their own copy of the public ledger. If you want to take down the system, good luck trying to hack thousands of computers who all have updated copies of the public ledger.

Fun Fact: The first ever recorded transaction was in 2010 by a guy named Laszlo, who requested two pizzas in exchange for 10,000 Bitcoin. That amount of Bitcoin would be worth almost $620 million today. Bad day for that guy.

BTC/USD Chart (01/02/23 - 01/02/24)
Who determines the price?

In 2008, Satoshi Nakamoto announced that Bitcoin’s supply cap would be pegged at 21 million, meaning there would be no more than 21 million Bitcoin to mine. As of right now, there are about 19 million Bitcoins in circulation with 2 million remaining to mine.

Bitcoin has created scarcity, which means that it’s limited supply makes it insanely valuable to own. Thus, Bitcoin’s price is determined by supply and demand. You can purchase Bitcoin through certain wallet apps or crypto exchanges, where you can trade Bitcoin for real money, just like stocks. So, somebody is going to give you Bitcoin for money. Now, as mentioned before, one Bitcoin is worth roughly $62,000 as of February 28’24. The minority has that money comfortably sitting in an account. But no worries. If you wanted to purchase Bitcoin, you can get portions of it. Those portions are called satoshis and should be available on any crypto exchange for the money you’re willing to trade it for.

Who owns Bitcoin?
Not only do individuals see Bitcoin as a lucrative investment but also big companies that buy huge amounts of Bitcoin. MicroStrategy Inc. (MSTR), a company that provides business intelligence, analysis solutions, and cloud-based services owns a little over 190,000 Bitcoin, which is worth over $11.5 billion dollars. Many assume that there is a relationship between current Bitcoin prices and stock prices of companies holding a lot of Bitcoin, but researchers beg to differ. 

Disclaimer: This content is for informational purposes only and is not intended as financial advice. We try to provide accurate information on personal finance and investing, but it may not apply directly to your individual situation. We are not financial advisors and we recommend you consult with a financial professional before making any serious financial decisions. There are risks associated with any investment which include but are not limited to stocks, bonds, currencies, cryptocurrencies, as well as any other market or investment vehicle. For more Terms, click here.