What is 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.
Inflation will bring down the true value of bank currency. Short term fluctuation in demand and offer 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’ve recently witnessed the split of Bitcoin. That is something similar to split of share in the currency markets. Companies sometimes split a stock into two or five or ten depending upon the market value. This can increase the level 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 original holders of Bitcoins could 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 like the miners sell Bitcoin to the general public, money supply is reduced in the market. However, this money is not going to the central banks. Instead, it would go to a few individuals who is able to become a central bank. Actually, companies are permitted to raise capital from the market. However, they are regulated transactions. This means as the total value of Bitcoins increases, the Bitcoin system could have the strength to hinder central banks’ monetary policy.
Bitcoin is highly speculative
How do you buy a Bitcoin? Naturally, somebody must sell it, sell it for a value, a value decided by Bitcoin market and probably by the sellers themselves. If there are more buyers than sellers, then the price goes up. This means Bitcoin acts like a virtual commodity. It is possible to hoard and sell them later for a profit. Imagine if the price of Bitcoin boils down? Of course, you’ll lose your money just like the way you lose cash 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, and also the means by which new Bitcoins are released.
How liquid may be the Bitcoin? It depends upon the volume of transactions. In stock market, the liquidity of a stock depends upon factors such as value of the business, free float, demand and offer, etc. In case of Bitcoin, it appears free float and demand will be the factors that determine its price. The high volatility of Bitcoin price is because of less free float and more demand. The value of the virtual company is dependent upon their members’ experiences with Bitcoin transactions. We would get some good useful feedback from its members.
What could possibly be one big problem with this system of transaction? No members can sell Bitcoin should they don’t have one. This means you must first acquire it by tendering something valuable you possess or through Bitcoin mining. A large chunk of the valuable things ultimately would go to a person who may be the original seller of Bitcoin. Of course, some amount as profit will certainly go to other members that are not the original producer of Bitcoins. buy bitcoin Some members may also lose their valuables. As demand for Bitcoin increases, the initial seller can produce more Bitcoins as is being done by central banks. Because the price of Bitcoin increases within their market, the initial producers can slowly release their bitcoins into the system and create a huge profit.