Cryptocurrency isn’t the same as a contactless credit card, which is essentially your physical credit card that’s been loaded into a mobile device, like your phone or watch. Cryptocurrencies like Bitcoin, Ethereum, and Tether sit in the digital world, but they aren’t tied to anything physical. So how do cryptocurrencies like these get their value? Experts say these non-tangible currencies are valuable because there’s a group of people that believe them to be so. That’s not too far fromt he truth.
“The actual value that these units have in people’s minds, like Bitcoin, for example, is whatever people believe it to be,” says Andrew Wu, a professor at the University of Michigan (per ABC 10). “People believe that it [crytopcurrency] has … some value. For example, either as an inflation hedge or as a way of a speculative vehicle. So, it’s very similar to a digital version of gold,” notes Wu, adding, “that’s basically the case for almost all of these cryptocurrencies out there.”
But the belief that cryptocurrencies are worth something also stems from several more grounded factors in addition to pure faith.