Bitcoin (BTC -0.77%) has easily been one of the best investment assets anyone could have owned. In the past 15 years, its price has been up a mind-boggling 1,700,000% (as of Oct. 4). This monster gain would've grown $10,000 into $171 million.
The leading cryptocurrency has certainly become a globally relevant financial instrument. But why exactly is Bitcoin worth more than $1.7 trillion right now?
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Bitcoin isn't a business
It goes without saying that Bitcoin is not like regular businesses. These entities sell products and services to customers, generating revenue. And they have expenses to deal with.
Bitcoin, on the other hand, derives its value from the perceived benefits users gain from owning it. From an investing perspective, Bitcoin's hard supply cap makes it a compelling portfolio holding. This holds if the rest of the market believes the same thing.
Additionally, Bitcoin maximalists expect that it will become more widely adopted as a medium of exchange one day. The strongest bulls believe this crypto will be prominently used in day-to-day transactions.
CRYPTO: BTC
Key Data Points
Bitcoin's $1.7 trillion market cap is significant, a value that rivals some of the most dominant companies on Earth. But this metric rests on its long-term potential, which is driven by narrative rather than by what Bitcoin is or does right now.
In other words, Bitcoin's valuation stems primarily from what it could be. It's a high-potential investment, for sure. The wide range of outcomes, however, adds tremendous uncertainty.
