Should Bitcoin Replace Currency of Central Banks?

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’s 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 trade of goods and services and even central bank authorized currencies.

Inflation will bring down the real 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 case of Bitcoin, its face value and real value both changes. We have recently witnessed the split of Bitcoin. This is something similar to split of share in the stock market. Bitcoin Cash Developer Guide split a stock into two or five or ten dependant 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 demand for the coins increases. Consequently, hoarding of Bitcoins automatically enables a person to produce a profit. Besides, the initial holders of Bitcoins could have a huge advantage over other Bitcoin holders who entered the market later. For the reason that sense, Bitcoin behaves like an asset whose value increases and decreases as is evidenced by its price volatility.

When the original producers like 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 goes to a few individuals who can become 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 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 there are more buyers than sellers, then your price goes up. It 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 boils down? Of course, you’ll lose your money just like the way you lose money in stock market. There is also another method of acquiring Bitcoin through mining. Bitcoin mining is the process where transactions are verified and added to the public ledger, known as the black chain, plus the means through which new Bitcoins are released.

How liquid may be 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 business, free float, demand and offer, etc. In the event of Bitcoin, it appears free float and demand are 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 depends 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 if they don’t have one. It means you will need to first acquire it by tendering something valuable you own or through Bitcoin mining. A big 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 initial 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 the price of Bitcoin increases within their market, the initial producers can slowly release their bitcoins into the system and make a huge profit.

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