Distinguish between Bitcoin and Central Bank Currency
What is the difference between a currency authorized by the central bank and Bitcoin? The holder of a currency authorized by the central bank may bid for the exchange of goods and services. The holder of Bitcoins cannot bid because it is a virtual currency authorized by a central bank. However, Bitcoin holders may transfer Bitcoins to another Bitcoin member’s account in exchange for goods and services, as well as in exchange for currency authorized by central banks.
Inflation will lower the real value of the bank’s currency. Short-term fluctuations in bank demand and supply of money markets in the money markets cause a change in the cost of borrowing. However, the nominal value remains the same. In the case of Bitcoin, its face value and actual value change. We recently saw the witness of Bitcoin splitting. It’s something like the distribution of shares in the stock market. Companies sometimes divide a share into two or five or ten depending on the market value. This will increase the volume of transactions. Therefore, while the intrinsic value of a currency decreases over a period of time, the intrinsic value of Bitcoin increases as the demand for coins increases. As a result, storing Bitcoins allows a person to profit automatically. In addition, the initial holders of Bitcoins will have a big advantage over other Bitcoin holders that will later enter the market. In this sense, Bitcoin acts as an asset that increases and decreases in value, as shown by price volatility.
When the original producers including the miners sell Bitcoin to the people, the money supply is reduced in the market. However, this money will not go to the central banks. Instead, it goes to some people who can act as a central bank. In fact, companies are allowed to raise capital in the market. However, they are regulated transactions. This means that as the total value of Bitcoins increases, the Bitcoin system will have the power to interfere with the monetary policy of central banks.
Bitcoin is highly speculative
How to buy a Bitcoin? Naturally, someone has to sell it, sell it for a value, the Bitcoin market and probably the value decided by the sellers themselves. If there are more buyers than sellers, the price goes up. Bitcoin means that it acts as a virtual asset. You can save and sell them later for a profit. If the price of Bitcoin goes down? Of course, you will lose money in the stock market as a way to lose money. There is also another way to acquire Bitcoin through mining. Bitcoin mining is the process of verifying and adding to the public brochure, known as the black chain, as well as the means to release new Bitcoins.
How liquid is Bitcoin? It depends on the volume of transactions. In the stock market, the liquidity of shares depends on factors such as the value of the company, free float, demand and supply. In the case of Bitcoin, it seems that free float and demand are the factors that determine its price. The high volatility of the Bitcoin price is due to less free movement and higher demand. The value of a virtual company depends on the experiences members have had with Bitcoin transactions. You may receive useful feedback from local members.
What could be a big problem with this transaction system? Members cannot sell Bitcoin if they do not. You mean, like, saltines and their ilk, eh? A big part of these valuable things is ultimately for a person who is an original Bitcoin seller. Of course, a certain amount of profit will go to members other than the original producer of Bitcoins. Some members will also lose valuable items. As the demand for Bitcoin increases, the original seller may generate more Bitcoins as central banks do. As the price of Bitcoin increases in the market, the original producers can slowly release their bitcoins into the system and reap great benefits.
Bitcoin is a private virtual financial instrument that is not regulated
Bitcoin is a virtual financial instrument, even if it is not a right to full currency, nor a legal sanctity. If Bitcoin holders form a private court to resolve issues arising from Bitcoin transactions, they may not be concerned about legal sanctity. Thus, it is a private virtual financial instrument for an exclusive group of people. People with bitcoins will be able to buy large quantities of goods and services on the public domain, which can destabilize the normal market. That will be a challenge for regulators. The inactivity of regulators could lead to another financial crisis as happened in the 2007-08 financial crisis. As usual, we can’t judge the tip of the iceberg. We cannot predict the damage it may cause. We only see the whole thing in the last stage, when we are unable to do anything except an emergency exit to survive the crisis. That, we’ve experienced since we started experimenting on things we wanted to control. Sometimes we were successful and often we failed, but not without sacrifice and loss. Do we have to wait until we see the whole thing?