Buying Altcoins with Bitcoin: Why Has It Become Altcoins to USD (Why is Bitcoin Priced in USD)?

Buying altcoins with Bitcoin has become converting altcoins to USD. In late 2017, during the bull market, the price of BTC reached $20,000. However, starting in December 2018, a downward trend began, and it fell from $11,000 to $21,500. By the beginning of 2019, BTC had already dropped to $30,000. It wasn’t until March 2020 that it officially started its rebound and has been continuously rising since then. The end-of-year surge in 2020 led to an overall market increase, and there was a clear upward trend in the market. During this time, due to the strong performance of BTC, mainstream currencies performed exceptionally well. But in the early hours of today, a news article sparked a heated discussion: someone compared Bitcoin and Ethereum and discovered that both projects are based on the Ethereum blockchain. Ethereum is a decentralized protocol, a smart contract platform, and a digital identity system. It allows developers to create and release products with various functionalities, such as tokenized credit cards or bank accounts, without the need for trust. Ethereum is also an open-source network that enables developers to quickly generate new code. Therefore, if ETH operates successfully, other cryptocurrencies will also follow its development, and even cryptocurrencies like XRP will be widely used. However, currently, the number of these projects is far less than Ethereum’s.

Many people believe that this phenomenon is caused by “speculation.” However, the situation now is that “inflation” has not had a substantial effect—mining rewards have no practical use but serve as an economic incentive. However, in reality, the more people participate, the less profits they receive. This means that when a person holds a pile of highly liquid cryptocurrencies and wants to sell all of them, they must sell them off. Thus, the cryptocurrencies that people want to sell or simply sell to cut losses because they cannot hold them for a long time. “Speculation” itself is not the purpose of investment but a way of storing value. On the contrary, what we need to do is to exchange our virtual currency in our wallet (such as ETH) for corresponding stable coins instead of directly using Bitcoin to purchase anything. This can ensure that investors’ investment returns will not be lost due to excessive losses.

Why is Bitcoin Priced in USD?

According to Bloomberg, the US dollar is the primary pricing unit for Bitcoin. Governments worldwide are starting to accept and issue digital currencies to maintain the stability of their exchange rates. Therefore, it is generally believed that cryptocurrencies are priced in fiat currency, not measured in fiat currency to determine their value.

Why is Bitcoin continuously priced in USD? Historically, the USD has often been used for trading commodities or services. However, a new trend has emerged: due to the US government taking a tough stance on the global economy (such as turning cash into gold), Bitcoin can coexist with and replace other major financial markets, which is a new means of payment.