Bitcoin and oil are two different things, but they hold a lot of value in today’s world. However, Bitcoin is decentralized in nature, meaning that it is independent of central government regulations and manipulations. Since its launch in 2009, this virtual currency has seen an increase in demand and has the largest market capitalization.
Bitcoin Decentralization and Perceptions
Because of the decentralized nature of this electronic currency, it does not suffer from geopolitical risks, which could cause increased uncertainty in other markets. Supply and demand are the only factors determining this virtual currency’s value. Since the supply of this digital asset is limited, its demand increases, increasing in value.
However, negative perceptions by influential people with substantial social media followings also affect the value of Bitcoin. If these influential people claim that this electronic money is a significant investment, the number of people who will invest in the asset increases. Eventually, the price of this virtual asset increases. However, if these influential people claim that this digital currency is a bad investment, people will withdraw their Bitcoin holdings; hence the value of Bitcoin decreases.
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Bitcoin Supply and Demand
This form of cryptocurrency is scarce due to high demand and limited supply. The public can only mine 21 million Bitcoins, whereby 2 million are in circulation. The other 19 million have already been mined. This limited supply of this electronic currency shows that its algorithm can always meet demand. The same algorithm is similar to oil demand. Volatile goods such as cryptocurrency and oil can be cashed in through arbitrage deals. Conversely, there are zero chances of incurring profits when oil prices increase because of geopolitical instability or supply disruptions. Bitcoin gains an advantage over other commodities in predicting how costs will behave.
Traditionally, people have been able to forecast oil supply and demand accurately. However, geopolitics will have a higher impact on the future of oil prices because of the recent threats by Iran to cut off oil shipments. But, the ability of this electronic money to overcome crises and regulatory hurdles makes it a safer bet than any other commodity when geopolitical risks are increasing rapidly.
Differences Between Bitcoin and Oil
This virtual currency and oil vary in terms of supply. This electronic money has a limited supply, while oil has a finite supply. There is no limitation to the amount of oil that people can extract. Because of this unlimited supply, oil prices have been stable for the longest time than Bitcoin. However, this electronic asset will become more volatile with time.
Bitcoin has only been around for over a decade and is now a successful form of currency. This digital asset has withstood both disruption and volatile price swings, proving to be a successful investment. This digital asset is a risky investment, so you should be prepared before getting into it.
Oil has a higher market capitalization than this electronic asset, which is currently worth over $20.97 billion. On the other hand, cryptocurrency is volatile; hence it is difficult to predict its value accurately. In addition, market value is dependent on how people are willing to buy a commodity at a retail level.
Bitcoin and oil vary differently. This virtual currency has a limited supply which contributes to its value. Ultimately, this digital has a higher potential of beating oil in 2023 because of the above reasons.