This article was originally posted on RealClearScience.
Bitcoin, the digital currency du jour, is a bit of an economic curiosity. Unlike gold, it has no intrinsic value. Unlike a currency issued by a country, its price is not affected by GDP, inflation, interest rates or any other typical macroeconomic indicator. So what gives Bitcoin value, and what is behind its incredible price volatility? Supply and demand. And since supply is already predetermined by an algorithm, demand is the biggest factor driving both its value and volatility. Continue reading