Bitcoin has value

Recently, an author wrote about the “Coin for the Greater Fool”. The real fool is the one who ignores the crypto currency.

The Bitcoin (BTC) project was launched on January 9, 2009. This made Bitcoin not only the first working crypto currency, but also the most well-known. Due to the enormous price increase of several tens of thousands of percent in the last decade, it is also the most successful asset in the past decade.

It has become one of the most chosen currencies for gambling worldwide now, check the best betting places online. There you will find many well known providers.

Bitcoin, once referred to as the currency for criminals in darknet, is increasingly becoming an established financial product for institutional investors and listed companies. The narrative has changed enormously in recent years. Meanwhile, proponents of Bitcoin see Bitcoin as the digital gold of the 21st century and appreciate above all the limited number and high transparency of the crypto currency.

In order to substantiate these initial theses, we would like to directly present current examples that reflect the interest of so-called institutional investors in Bitcoin.

Institutional investors are hedge funds, pension funds or even family offices

  • The Tudor Investment Corporation of billionaire and hedge fund manager Paul Tudor Jones has invested 2% of the fund capital in the crypto currency Bitcoin. The hedge fund manages assets of 34 billion dollars.
  • Marine Wealth Advisors (AuM: $35 billion) is working with Eaglebrook Advisors to provide clients with access to Bitcoin.
  • The US company SkyBridge Capital, which manages around USD 8 billion, has filed an SEC application for a Bitcoin-based investment product.
  • The U.S. investment firm Renaissance Technologie, which manages the Medallion Hedge Fund, the best hedge fund by performance for the years 1988 to 2018, has allocated part of its portfolio to Bitcoin Futures. The company manages over $70 billion in assets.

All of these factors will threngthen the bitcoin foundation, read more at this page. Investment Grayscale offers institutional investors access to Bitcoin through the so-called Grayscale Bitcoin Trust. On November 25, 2020, the company managed more than 12 billion US dollars in assets. According to the investment company, 80% of the demand side is covered by hedge funds.

Grayscale Bitcoin Trust

bitcoin currency

Source: Grayscale Report Q3 2020, quarterly inflows into Grayscale Trust products. The dark blue column shows the development of the Grayscale Bitcoin Trust (GBTC).

In addition to increased interest from institutional investors, interest from listed companies also increased.

The two best-known companies that are investing some of their liquidity in Bitcoin this year in order to escape the advancing depreciation of the dollar are MicroStrategy and Square.

MicroStrategy is a NASDAQ-listed software company focused on business intelligence solutions. Square Inc. is a financial services company led by Twitter CEO Jack Dorsey. We explain the dollar devaluation by an increase in the balance sheet of the US Federal Reserve. The following chart shows this.

While the money supply has increased over the last 12 years from $870 billion on January 7, 2008, to $7.2 trillion on November 9, 2020, US GDP has grown by an average of just 1.23%. A growth of the balance sheet by a factor of 10 contrasts with an average annual growth of the economy of 1.23%.

After this short digression, which showed current examples of the interest of institutional investors in Bitcoin, we summarize the most important features of Bitcoin for newcomers to the topic.

What is Bitcoin? The basic concept of Bitcoin was first published on October 31, 2008 by Satoshi Nakamoto in the so-called Bitcoin Whitepaper. Satoshi Nakamoto is merely a pseudonym. The inventor is therefore not known. A whitepaper is a mostly scientific work, which provides more detailed explanations of the concept and function of a certain topic.

The title of the whitepaper is “Bitcoin: A Peer-to-Peer Electronic Cash System”. Translated into German, Bitcoin is thus electronic money based on peer-to-peer technology. Bitcoin is essentially a decentralized accounting system that verifies each transaction, compares it with the rest of the accounting system and updates it. The new status quo of the booking system is then shared with all participants in the network. This technology is called distributed ledger technology.

Afterwards the new status quo of the booking system is shared with all participants in the network. This technology is called distributed ledger technology. Bitcoin is thus the first globally accepted, digital and completely decentralized crypto currency. Thus, Bitcoin is basically used to transmit a value.

However, Bitcoin offers not only the functionality of transmitting values, but also the possibility of a storage medium. Investors therefore also use the crypto currency BTC to secure part of their existing capital.

In the past, it has been shown that the capital was not only stored in a value-stable manner, but also effectively increased in value by increasing the Bitcoin exchange rate. We substantiate the two theses just mentioned with the examples shown above regarding the investment behaviour of hedge funds and listed companies.

As a further indicator for this statement, we use the following graph of the Swiss company Glassnode. Glassnode is a company specialized in the analysis of cryptospecific data. The graph above shows that at a current Bitcoin price of $17,000, more than 97% of all Bitcoin owners are in the Profit Zone.

In addition, the Bitcoin network, the so-called Blockchain, can also be used for other applications. An example of this is digital identities. The currency Bitcoin represents only the first and most fundamental application.

What actually makes Bitcoin so special, and what are the most important properties of this crypto currency?

value of bitcoin

For outsiders, the special features of Bitcoin are not apparent at first glance. Only a closer look at the fundamental properties gives an insight into the revolutionary concept behind BTC.

Scarcity: The maximum number of Bitcoin available is limited to 21,000,000 BTC. So there will never be more than 21 million BTC. This limit is fixed and unchangeable in the open source code of Bitcoin. Bitcoin thus represents the first and purest form of digital scarcity. Scarcity is the basis of a store of value, which in turn is one of the three main functions of money.

In particular, scarcity is regarded in economics as one of the most important factors for the value development and stability of a good. One point of criticism of this theory is that only the supply side is considered. This breakthrough was only achieved after decades of research and development of various cryptographers.

Decentralized: Bitcoin was not the first attempt to create decentralized money. But all the previous experiments failed after a short time without visible success. Bitcoin is controlled by no one and at the same time by everyone in the network. There is no central authority or middleman. The network is open to everyone and can be used without restriction by anyone in the world.

  • The game-theoretical concept behind Bitcoin encourages all participants in the network to adhere to the rules of the game. Any attempt to rewrite or circumvent the rules is punished by the rest of the network.
  • BTC is, so to speak, a living organism that regulates itself – and has been doing so for over 11 years now.
  • According to Metcalfe’s law, a fundamental aspect for the evaluation of Bitcoin can already be the network size of the block chain. This law is a classical network or graph theory.
  • Above a certain size, so-called economies of scale arise, which increase the benefit of a network quadratically to the number of users.

Neutral and resistant to censorship: Bitcoin is often compared to the Internet – the Internet of money. It fulfills similar characteristics and extends the Internet with digital money. Due to the high degree of decentralization, the network is always neutral and also makes it resistant to censorship. Every transaction is the same in the network. There is no discrimination among the participants.


  • The Bitcoin network is open and transparent. Anyone can verify and check what the status quo is at any time.
  • This not only determines how many Bitcoins already exist in total, but also how they are distributed and how many are created.
  • As a result, there is no way to create BTC from scratch without the rest of the network noticing. In theory, this makes it the perfect store of value.
  • The participants in the network are pseudonymous. Anyone can view the credit balance of a Bitcoin Wallet, but cannot say who owns the Bitcoins.
  • The participants in the network are pseudonymous. Anyone can view the credit balance of a Bitcoin Wallet, but cannot say who owns the Bitcoins.

Safe: The Bitcoin network is the safest decentralized system worldwide. The security is primarily provided by the so-called miners, who make their computer power available to the network to search for new blocks.

The enormous energy input and high investment costs in terms of hardware, infrastructure and manpower ensure security and give Bitcoin a certain intrinsic value. The principle can be compared to the mining of gold.

In order to give the miners sufficient incentive, each new block contains Bitcoins, which the finder receives. It is thus a reward for the service and provision of resources.


Currently, 6.25 BTC per block. On average, one block is created every 10 minutes. The reward per block is reduced by half every 210,000 blocks – the so-called Bitcoin Halving.

  • On average, this happens every 4 years and ensures that the production rate of new Bitcoin is constantly decreasing.
  • In the past, this event has repeatedly caused an enormous rise in the share price as a result of a supply shock.
  • The next halving will take place in 2024. At that time, Bitcoin will officially be harder than gold.

Hardness in this context means that it would take longer to create all existing Bitcoins at the current production rate than it would take time to reproduce the current gold holdings since the start of production at the current production rate.

In addition, the production rate, like the maximum number, cannot be changed to the same extent as for gold. This is due to the fact that Bitcoin production is independent of the energy used to search for new blocks in the network.


Bitcoin is a real revolution and solves a problem that our ancestors had to struggle with for centuries: independent money that can be shipped worldwide and also has a transparent scarcity.

A store of value, which is one of the basic functions of money, must be difficult to obtain and limited in its number. BTC solves exactly this problem.

There is much more to discover and understand at Bitcoin. But that would go beyond the scope of this article. We have just scratched the surface. If you want to take a closer look at the question “What is Bitcoin”, you can access the deposited article.