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 is 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 exchange of goods and services and even central bank authorized currencies.
Inflation 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 facial skin 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. That is something like split of share in the currency markets. Companies sometimes split a stock into two or five or ten depending upon the market value. This will increase the level of transactions. Therefore, as 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 an individual to make a profit. Besides, the original holders of Bitcoins will have an enormous advantage over other Bitcoin holders who entered the market later. In that sense, Bitcoin behaves as 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 on the market. However, this money won’t the central banks. Instead, it goes to a few individuals who can act like a central bank. In fact, companies are allowed 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 interfere with 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 just like a virtual commodity. It is possible to hoard and sell them later for a profit. Imagine if the price of Bitcoin comes down? Of course, you’ll lose your money similar to the way you lose cash in stock market. Addititionally there is another way 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, plus the means by which new Bitcoins are released.
How liquid is the Bitcoin? It depends upon the volume of transactions. In stock market, the liquidity of a stock is dependent upon factors such as for example 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 value of the virtual company depends 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 if they don’t have one. It means you must first acquire it by tendering something valuable you own or through Bitcoin mining. A large chunk of these valuable things ultimately would go to a person who is the original seller of Bitcoin. Of course, some amount as profit will certainly go to other members who are not the original producer of Bitcoins. 코인커뮤니티 may also lose their valuables. As demand for Bitcoin increases, the original 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.