What may be the difference between central bank authorized currency and Bitcoin? The bearer of central bank authorized currency can merely tender it for exchange of goods and services. The holder of Bitcoins cannot tender it because it’s a virtual currency not authorized by a central bank. However, Bitcoin holders might be able to transfer Bitcoins to another account of a Bitcoin member in exchange of goods and services and also central bank authorized currencies.
cryptocurrency will bring down the true value of bank currency. Short-term fluctuation in demand and supply of bank currency in money markets effects change in borrowing cost. However, the face value remains the same. In case of Bitcoin, its face value and real value both changes. We have recently witnessed the split of Bitcoin. This is something like split of share in the stock market. Companies sometimes split a stock into two or five or ten dependant on the market value. This can increase the volume of transactions. Therefore, while the intrinsic value of a currency decreases over a period of time, the intrinsic value of Bitcoin increases as demand for the coins increases. Consequently, hoarding of Bitcoins automatically enables an individual to produce a profit. Besides, the initial holders of Bitcoins will have a huge advantage over other Bitcoin holders who entered the marketplace later. For the reason that sense, Bitcoin behaves like an asset whose value increases and decreases as is evidenced by its price volatility.
When the original producers including the miners sell Bitcoin to the public, money supply is reduced available in the market. However, this money is not going to the central banks. Instead, it goes to a few individuals who can become a central bank. Actually, companies are permitted to raise capital from the marketplace. However, they’re regulated transactions. This means as the total value of Bitcoins increases, the Bitcoin system will have the strength to hinder central banks’ monetary policy.
Bitcoin is highly speculative
How do you purchase a Bitcoin? Naturally, somebody has to sell it, sell it for a value, a value decided by Bitcoin market and probably by the sellers themselves. If you can find more buyers than sellers, then the price goes up. This means Bitcoin acts just like a virtual commodity. You can hoard and sell them later for a profit. Imagine if the price of Bitcoin comes down? Of course, you will lose your money just like the way you lose money in stock market. There is also another method of acquiring Bitcoin through mining. Bitcoin mining is the process where transactions are verified and put into the public ledger, referred to as the black chain, as well as the means through which new Bitcoins are released.
How liquid may be the Bitcoin? It depends upon the volume of transactions. In currency markets, the liquidity of a stock is dependent upon factors such as for example value of the company, free float, demand and offer, etc. In the event of Bitcoin, it appears free float and demand will be the factors that determine its price. The high volatility of Bitcoin price is due to less free float and more demand. The value of the virtual company depends upon their members’ experiences with Bitcoin transactions. We might get some good useful feedback from its members.
What could possibly be one big problem with this particular system of transaction? No members can sell Bitcoin should they don’t have one. This means you will need to first acquire it by tendering something valuable you own or through Bitcoin mining. A large chunk of these valuable things ultimately goes to a person who is the original seller of Bitcoin. Of course, some amount as profit will surely go to other members that are not the initial producer of Bitcoins. Some members will also lose their valuables. As demand for Bitcoin increases, the initial seller can produce more Bitcoins as has been done by central banks. As the price of Bitcoin increases in their market, the initial producers can slowly release their bitcoins into the system and make a huge profit.