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 may be able to transfer Bitcoins to another account of a Bitcoin member in trade of goods and services and even central bank authorized currencies.
Inflation will bring down the real 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 the event of Bitcoin, its face value and real value both changes. We’ve 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, the intrinsic value of Bitcoin increases as demand for the coins increases. Consequently, hoarding of Bitcoins automatically enables a person to create 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 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 act like a central bank. In fact, companies are allowed to raise capital from the marketplace. However, they are 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 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 just like a virtual commodity. You can hoard and sell them later for a profit. What if the price of Bitcoin boils down? Of course, you’ll lose your money similar to the way you lose money in stock market. There is also another way of acquiring Bitcoin through mining. Bitcoin mining is the process where transactions are verified and put into the public ledger, known as the black chain, plus the means through which new Bitcoins are released.
How liquid may be the Bitcoin? It depends upon the quantity of transactions. In currency markets, the liquidity of a stock is dependent upon factors such as value of the company, free float, demand and supply, 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 due to less free float and much more demand. The worthiness of the virtual company is dependent upon their members’ experiences with Bitcoin transactions. We may get some useful feedback from its members.
What could 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 possess 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. 코인커뮤니티 will 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 in their market, the original producers can slowly release their bitcoins in to the system and make a huge profit.
