As we are well aware, bitcoin is one of the most wanted cryptocurrencies globally. The only reason for this global interest in bitcoin started when luxury multi-billionaire companies like Tesla and Square started investing in bitcoin. Let us look into the different ways in which bitcoin becomes a luxury good.
How many bitcoins can be ever mined?
Bitcoin is based on blockchain technology, and the transactions are completely anonymous. But, since Bitcoin is a digital currency, how can the total amount of Bitcoins ever be limited?
After all, don’t programmers frequently make changes to software code? Because Bitcoin is based on a decentralized ledger, with millions of computers all over the globe working to confirm transactions and safeguard the blockchain that Bitcoin is built on, any changes to the currency require consensus.
Bitcoin has an innovative governance structure built into it, where some modifications, such as the maximum amount of Bitcoins that may ever be mined is restricted to 21 million, require the participation of all users to be implemented.
If all the engineers behind the bitcoin currency try to increase the number of bitcoins that would be available in the future, it would lead to a loss of originality of bitcoin. The Bitcoin Up ™ – The Official & UPDATED Website 2021 has more details of this change.
How does bitcoin become a luxury good?
A luxury good is also called a Veblen good. Developed from the beliefs of Thorstein Veblen, a U.S. economist who recognized the value in conspicuous consumerism, Veblen observed that prices of some items might rise higher since this made their value more noticeable in the eyes of the beholder. And this helps to explain why elevated disclosures of big Bitcoin investments by well-known figures assist to drive the price of Bitcoin upward.
Because Bitcoin is an anonymous good, it is critical to acquire it through publicly traded corporate entities to elevate its status as a Veblen good — Compulsory regulatory filings disclose who is holding Bitcoin on their books.
As more and more investors get interested in bitcoin, the price of bitcoins rises higher than ever. In the year 2021, it reached a record of fifty thousand dollars. Bitcoin can therefore be labeled as a Veblen good as it has now a luxury status, and only a few people can afford to hold bitcoin with that amount of money.
But, is the magic of bitcoin slowly fading?
Bitcoin is no longer the mystical online currency that it once was. There are no dark forces at work that are forcing it to act in a way that is opposed to traditional markets. There are a lot of disenfranchised idealists, inhabitants of nations with untrustworthy central banks, doing things that aren’t traditional.
- Everything changed when the coronavirus wreaked havoc on global banking. Many cautioned that Bitcoin, the digital currency known for its lack of correlation, was broken and that if it was associated with traditional markets, its usage and value would vanish.
- Bitcoin was initially purchased mostly for ideological grounds. It was used to purchase online items, and as it is a decentralized currency, there existed no data. But when the big brands started investing in it, bitcoin was changing its form into a more serious type of currency.
- The capacity to confirm that a digital property is only in one location at a time is what blockchain technology is all about. That skill established the groundwork for it to potentially gain value in the future, which it has. But, unlike other assets, it also serves as a payment channel, allowing value to be moved.
Bitcoins can be treated as luxury goods, but as it is an extremely volatile currency, there can be a drop in its value at any time. Therefore it is wise to research and then invest in something so unpredictable.