Distinction between bitcoin and central banking currency
What is the difference between the currency authorized by the Central Bank and Bitcoin?
The central bank authorized currency holder can only provide for the exchange of goods and services.
Bitcoin holders cannot offer it because it is a virtual currency that is not authorized by a central bank. However, Bitcoin holders may be able to transfer Bitcoin currencies to another Bitcoin member account in the exchange of goods, services and even currencies authorized by the Central Bank.
Inflation will depress the real value of the bank's currency.
- Short-term fluctuations in demand and supply of banks'
- currency in the money markets affect the changing cost of borrowing.
- However, the nominal value remains the same.
- In the case of Bitcoin, its nominal value and real value change.
- We have recently seen bitcoin split. This is something like splitting the share in the stock market.
- Companies sometimes divide shares into two or five or ten by market value.
This will increase the volume of transactions.
Therefore, while the intrinsic value of the currency decreases over a period of time, the intrinsic value of bitcoin increases as the demand for currencies increases.
Thus, hoarding bitcoins enables a person automatically to make profits.
Besides, the initial Bitcoins holders will have a great advantage over other Bitcoin holders who later entered the market. In this sense, Bitcoin acts as an asset that increases in value and decreases as evidenced by its price volatility.
When original producers, including miners :
- sell bitcoin to the public
- the market's money supply falls. However
- this money will not go to central banks. Instead
- it is given to a small group of people who can act as a central bank.
In fact, companies are permitted to raise funds on the open market.
- However, they are structured transactions.
- This means that as the total value of bitcoin rises, so does the price of bitcoin.
- bitcoin will have the power to interfere with central banks' monetary policy.
Bitcoin is very speculative
Buy Bitcoin?
Of course, someone should sell it, sell it at a value, a value decided by the bitcoin market and perhaps the sellers themselves. If more buyers than sellers, the price goes up.
As a result, bitcoins function as a virtual commodity. You can store them and sell them later for a profit.
What if bitcoin price drops?
Of course, you will lose your money just like the way you lose money in the stock market.
Another way to obtain Bitcoin is through mining. Bitcoin mining is the process of verifying and adding transactions to the general ledger, also known as the black chain, as well as the process of creating new bitcoins.
How liquid is bitcoin?
It depends on the volume of transactions.
In the stock market, stock liquidity depends on factors such as company value, free float, demand and supply, etc. In the case of Bitcoin, free float and demand appear to be the factors determining its price.
The high volatility of bitcoin price is due to low free float and increased demand. The company's virtual value depends on its members' experiences in bitcoin transactions. It's possible that we'll get some useful feedback from its members.
What can be a major problem with this transaction system?
Members who do not have Bitcoin cannot sell it. This means you should get it first by tendering something of value you own or by mining bitcoin. Much of this valuable stuff eventually goes to the original bitcoin seller.
Of course, some of the amount as profits will certainly go to other members who are not the original bitcoin producers.
Some members will also lose their valuables. With increased demand for Bitcoin, the original seller can produce more Bitcoin coins as central banks do. As the price of bitcoin rises in their markets, original producers can launch their bitcoins into the system and make a huge profit.
Bitcoin is an unregulated virtual private financial tool
- Bitcoin is a virtual financial instrument
- although it does not qualify as a full currency
- nor does it enjoy legal sanctity.
- If Bitcoin holders set up a special court to resolve their problems arising from Bitcoin transactions
- they may not worry about legal sanctity.
Thus, it is a private virtual financial tool for an exclusive group of people.
- People with bitcoins will be able to buy huge quantities of goods
- and services in the public domain, potentially destabilizing the normal market.
- This will be a challenge for regulators. Inaction by regulators can lead to another financial crisis
- as was the case during the 2007-2008 's financial crisis.We can't judge the tip of the iceberg, as usual.
We won't be able to predict the damage you can do.
Only at the last stage do we see everything, when we are unable to do anything except the emergency exit to survive the crisis. That's what we've been going through since we started experimenting on things we wanted to control. We have succeeded in some and failed in many, albeit not without sacrifice and loss.
Are we waiting until we see everything?