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 might be able to transfer Bitcoins to another account of a Bitcoin member in exchange 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 the event of Bitcoin, its face value and real value both changes. We’ve recently witnessed the split of Bitcoin. This is something like split of share in the currency markets. 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 of time, the intrinsic value of Bitcoin increases as demand for the coins increases. Consequently, hoarding of Bitcoins automatically enables an individual to create a profit. Besides, the original holders of Bitcoins will have a huge advantage over other Bitcoin holders who entered the market later. For the reason that sense, Bitcoin behaves as 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 available in the market. However, this money won’t the central banks. Instead, it would go to a few individuals who is able to become a central bank. Actually, companies are permitted to raise capital from the marketplace. However, they’re regulated transactions. This means as the total value of Bitcoins increases, the Bitcoin system could have the strength to interfere with central banks’ monetary policy.

Bitcoin is highly speculative

How do you purchase a Bitcoin? Naturally, somebody must sell it, sell it for a value, a value decided by Bitcoin market and probably by the sellers themselves. If Bitcoin Cash Token can find more buyers than sellers, then your price goes up. This means Bitcoin acts like a virtual commodity. It is possible to hoard and sell them later for a profit. What if the price of Bitcoin boils down? Of course, you’ll lose your money just like the way you lose money in stock market. Addititionally there is another way of acquiring Bitcoin through mining. Bitcoin mining may be the process where transactions are verified and added to the public ledger, known as the black chain, as well as the means through which new Bitcoins are released.

How liquid is the Bitcoin? It depends upon the quantity of transactions. In currency markets, the liquidity of a stock depends upon factors such as value of the business, 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 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 useful feedback from its members.

What could possibly 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 possess or through Bitcoin mining. A big chunk of the valuable things ultimately goes to a person who may be the original seller of Bitcoin. Of course, some amount as profit will surely go to other members that are not the initial producer of Bitcoins. Some members will 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 in their market, the initial producers can slowly release their bitcoins in to the system and make a huge profit.


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