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 trade of goods and services and also central bank authorized currencies.
crypto mixer 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 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 stock market. Companies sometimes split a stock into two or five or ten depending upon the market value. This will increase the level 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 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. In 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 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 permitted to raise capital from the market. 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 has to 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 your 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 will lose your money just like the way you lose cash in stock market. There is also another way of acquiring Bitcoin through mining. Bitcoin mining is the process by which transactions are verified and put into the public ledger, referred to as the black chain, and also the means through 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 value of the company, free float, demand and offer, etc. In case of Bitcoin, it seems 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 worthiness of the virtual company is dependent upon their members’ experiences with Bitcoin transactions. We might get some good 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. It means you must 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. Needless to say, some amount as profit will surely go to other members who are not the original producer of Bitcoins. Some members may also lose their valuables. As demand for Bitcoin increases, the initial seller can produce more Bitcoins as has been 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 make a huge profit.