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Bitcoin works the same way that the US$ works, it is backed by nothing, (like the US$), and only has value because people think that it does. (Like the US$).
However bitcoin is limited to 21 million units, while more US$ can be created each year. This makes bitcoin a potentially deflationary currency, whereas US$ is a potentially inflationary currency. (Doesn't mean either always acts that way, but it does describe the potential trend.
I wouldn't recommend speculating in bitcoin unless you have a healthy amount of conventional investment assets. If you do, I would keep the per centage of bitcoin assets at a small amount.
Whatever you put into bitcoin, kiss it goodbye. Maybe it goes back up, maybe it doesn't. Nobody knows what it will do.
I have had a lot of fun with my bitcoin speculation.
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While I get where you are coming from, any currency is backed by the strength of the economy that uses it. While I think the US Economy has serious cracks in it, it may still be the best house on a bad block. Additionally, it is essentially backed by oil because oil is traded in the US Dollar. If the oil market changes, and they have been trying to change it, then that could spell serious problems for the dollar. Losing our current trade ware could also create issues.
Someone else hit the nail on the head about it being created so that it can't be controlled by any government. The problem is that by not being controlled by any government, it is controlled by every government. China has manipulated it a couple of times. I guarantee you that some politicians wanted to make a quick buck so they sell, then an announcement comes out that it is illegal in China so the price drops significantly and they get to buy. Then after the price bottoms out it is legal again and the price runs up so that they get to sell again.
Since there are no trade consequences, no one that will go to war with them over the currency, no real regulators to slap their hands over manipulating it, anyone with enough power and money manipulate the market. I don't think that crypto will ever go away because you can bet govt's are using it for their dirty dealings so in that way it is useful to them. However, they won't let it threaten their own currency.
On interesting little factoid is that there are bread crumbs for every transaction embedded in bitcoin. So, all of those dark web interactions for child porn, sex trafficking, drugs etc are embeded in it. I don't think they would crack down on that because it would be like prosecuting someone for the cocaine on their $100 bills, but people are theoretically holding highly illegal images in their crypto without knowing it.