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 is a virtual currency not authorized by way of a central bank. However, Bitcoin holders may be able to transfer Bitcoins to some other 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 offer 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 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 depending upon the market value. This can increase the volume 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 a person to make a profit. Besides, the original holders of Bitcoins will have a huge 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 general public, money supply is reduced in the market. However, this money won’t the central banks. Instead, it would go to a few individuals who is able to act like a central bank. In fact, companies are permitted to raise capital from the market. However, they are regulated transactions. This means because the total value of Bitcoins increases, the Bitcoin system will have the strength to interfere with 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 such as 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 will 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 by which transactions are verified and put into the public ledger, known 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 quantity of transactions. In stock market, the liquidity of a stock depends 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 because of less free float and more demand. The worthiness of the virtual company is dependent upon their members’ experiences with Bitcoin transactions. We may get some good useful feedback from its members.
What could be one big problem with this system of transaction? No members can sell Bitcoin should they don’t have one. This means you have 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 certainly go to other members that are not the original producer of Bitcoins. Some members may also lose their valuables. As demand for Bitcoin increases, the original seller can produce more Bitcoins as has been done by central banks. Because 코인선물옵션 of Bitcoin increases within their market, the initial producers can slowly release their bitcoins in to the system and create a huge profit.