How does Bitcoin have value even though it isn’t backed by the government?

Bitcoin has become a major player in the financial world, raising the interest of investors and enthusiasts worldwide. At the moment of writing, it has a market cap of $2,055.94B and remains one of the most sought-after cryptocurrencies, enabling people to transact with each other without intermediaries. Bitcoin is tamperproof, globally accessible, and censorship-resistant, and is also secured by energy.

This digital asset has value because it can be exchanged for fiat currency. Many people convert btc to usd to see how much Bitcoin is worth,  and the reason why this asset maintains a high exchange rate is that it sees high demand from investors who are interested in the possibility of returns. However, many other factors impact the value of Bitcoin, and we will explore them below.

Supply and demand

The value of crypto is influenced by supply and demand, just like any other things people want. Suppose demand increases quicker than supply, the price rises too. For instance, when there is a drought, the price of grain increases naturally unless demand changes. The same principle applies to cryptocurrencies, with their value increasing when demand is higher than supply.

Bitcoin has a fixed maximum supply and compared to traditional currencies that can be printed by central banks, there will only ever be 21 million Bitcoins. The scarcity of the asset creates a sense of exclusivity and value, as is the case with precious metals like gold. As long as the demand for Bitcoin continues to rise, the limited supply is a catalyst that drives its price higher.

Market sentiment

Market sentiment plays a major role in determining the value of Bitcoin. As people become increasingly aware of this cryptocurrency’s potential, demand for it surges. Market sentiment essentially refers to investors’ collective attitude towards a specific market or asset. In the cryptocurrency landscape, it is shaped by different factors, ranging from news events and social media impact to market trends and influential figures, among other things.

For instance, during the Bitcoin bull run of 2017, the price of Bitcoin surged considerably from $1,000 to about $20,000, and that surge was driven by excessive media coverage, which attracted new investors, as well as FOMO, with investors rushing to purchase BTC so that they could capitalize on rising prices. As a result, Bitcoin experienced an exponential price increase.

Store of value

Bitcoin is seen as a store of value because, like gold and other precious assets, it retains its purchasing power over time and can be exchanged for something else. A good store of value should be portable, durable, divisible, fungible, scarce, and verifiable, and Bitcoin meets all these criteria.

Bitcoin’s utility and liquidity have increased exponentially over the past years, and as a result, the digital asset is now more accessible than ever for users. Furthermore, businesses worldwide accept it, and recently, Bitcoin ETFs have emerged, which is a robust signal of the growing utility and liquidity of Bitcoin, further increasing its strength as a store of value. Notably, many people see it as a hedge against economic instability and inflation. Its decentralized nature and limited supply make Bitcoin resistant to manipulation and interference, attracting individuals who want to preserve their wealth and safeguard it from economic downturns.

Medium of exchange

Another factor that influences the value of Bitcoin is its use as a medium of exchange. Throughout history, Bitcoin has seen widespread acceptance as a digital asset that can be utilized to buy goods and services from an increasing number of merchants worldwide. As the use of Bitcoin as a payment method continues to increase, so does its value.

Furthermore, Bitcoin's unique cost-effectiveness and speed make it stand out from traditional banking systems. It’s more appealing to use Bitcoin for remittances and cross-border payments, and this is one of the characteristics that drives its worth. However, challenges, including scalability and network congestion, need to be overcome.

Is Bitcoin here to stay?

Bitcoin has undoubtedly proven its potential over time, and it’s clear that it isn’t just a passing fad. Its adoption is growing, although not evenly. In developing countries, with high inflation and limited banking services, Bitcoin helps protect savings, while in wealthier nations, it is seen as a long-term investment instead of something to spend. In Central and South Asia, Bitcoin is seeing massive crypto adoption, and the same is true when it comes to high-income countries, thanks to the introduction of Bitcoin ETFs. What’s more, the U.S. government currently holds about 200,000 Bitcoins in its strategic reserve, signaling a shift from regarding crypto as a threat to viewing it as a financial asset that can bring long-term value.

Bitcoin’s future depends significantly on regulation. The pro-crypto stance in the U.S. has led to clearer rules around cryptocurrencies and exploring a digital asset landscape that is backed by the government. Moreover, the UK released new rules in April 2025 to implement regulations of exchanges and ensure consumer protection. This is a notable milestone that signals a shift towards greater legitimacy of cryptocurrencies.  Simultaneously, legal cases are changing how crypto is regarded. In 2023, a U.S. court ruled that some digital assets are seen as securities when sold to institutions; however, that’s not the case if they are traded on public exchanges. The legal grey area still exists currently, and it remains to be seen how things will evolve in terms of regulation, which will further define the trajectory of Bitcoin.

Regarding Bitcoin’s performance a decade from now, analysts’ opinions vary. Some believe that it could hit as much as $1 million based on increasing institutional investment as well as supply limitations. On the other hand, others warn that Bitcoin could lose value if better technologies emerge and replace it, or in case regulations tighten. No matter how things unfold for the leading cryptocurrency, one thing is clear: it’s no longer just an experiment, but a global asset with significant impact.

The bottom line

Bitcoin has become part of a larger conversation in the financial world, and its adoption across the world is steadily growing. Even if it isn’t backed by the government, Bitcoin derives its worth from other factors, like its use as a medium of exchange and store of value, as well as market demand and its limited supply. While Bitcoin is far from perfect, it has changed how people think about freedom and trust, and the next decade will show whether the asset stays a niche asset or becomes the foundation of a new global economy.

(Disclaimer: Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)