Before we can understand the value of crypto we have to understand our own money - the money that you have in your bank account or your back pocket, that’s fiat money.
Cryptos like bitcoin have value because our own currency is becoming devalued. Allow me to explain ...
Fiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. The value of fiat money is established from the relationship between supply and demand. Most modern currencies are fiat currencies, including the GBP, U.S. dollar and the euro.
The problem is that most fiat money loses purchasing power over time because governments and central banks tend to overprint as a way to increase economic growth. For instance, about a fifth of all US dollars were printed in 2020. (https://www.cityam.com/almost-a-fifth-of-all-us-dollars.../
This has the by-product of devaluing the currency. Cryptocurrencies like Bitcoin help us guard against devaluation. But how?
Bitcoin by contrast is purely digital money that can’t be over produced. It has a fixed supply: 21 million. It doesn’t exist in physical form, it’s only virtual. Each bitcoin is basically a computer file which is stored in a 'digital wallet' app on a smartphone or computer that is outside of government control. Fiat money holds value in the short term but over the long term it tends to lose value and purchasing power because of overprinting, or quantitative easing as it’s now called. In 1975 the average house price was just over ?10,000. Even if you adjust for inflation it is calculated at just under ?100,000. At the time of writing this article the average price of a house is just shy of ?270,000. An item that cost ?50 in 1970 cost ?780 in 2019's money. Bitcoin is a protection against inflation because of its scarcity and limited supply. In fact, despite significant fluctuations, the value of bitcoin has increased over time. Even with fluctuations, the average annual growth rate for bitcoin is 408% https://www.upmyinterest.com/fund?tick=bitcoin
So are fiats worth it? Not for my money.
