5/19/2021 7:27:41 AM GMT
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By FXStreet Insights Team
Bitcoin and other cryptocurrencies have been getting a lot of attention lately. One Bitcoin ranged in price from $1,000 in early 2017 to a high of over $60,000 in March 2021, with intense volatility in between. Understandably, investors have questions – the Schwab Center for Financial Research tries to answer some of the most common.
Investors should treat Bitcoin as a speculative asset class primarily for trading
What is a cryptocurrency, and how is it valued?
“Fiat currencies like US dollars and euros are forms of money issued by governments to serve as legal tender. Cryptocurrencies such as Bitcoin, on the other hand, are ‘non-fiat,’ non-governmental forms of ‘digital cash’ to be used for electronic payments. Proponents believe the value of a cryptocurrency is based on the quality of the cryptology, the number of cryptocurrency units created, and the technology that limits the creation of additional units. Like any traded item, the value depends on supply and demand; the less units available, the higher the price buyers are willing to pay.”