Should Bitcoin Replace Currency of Central Banks?

Others

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 is a virtual currency not authorized by a central bank. However, Bitcoin holders may be able to transfer Bitcoins to some other 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 supply 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 dependant on 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 produce a profit. Besides, the initial holders of Bitcoins will 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 including 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 goes to a few individuals who can become a central bank. Actually, companies are permitted to raise capital from the market. However, they’re 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 buy 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 you can find more buyers than sellers, then the price goes up. It means Bitcoin acts just like a virtual commodity. You can hoard and sell them later for a profit. What if the price of Bitcoin boils down? Of course, you will lose your money similar to 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, known as the black chain, plus the means by which new Bitcoins are released.

How liquid may be the Bitcoin? It depends upon the volume of transactions. In currency markets, the liquidity of a stock depends upon factors such as value of the company, free float, demand and supply, etc. In the event 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 much 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 particular system of transaction? No members can sell Bitcoin should they don’t have one. This means you will need to first acquire it by tendering something valuable you possess or through Bitcoin mining. A big chunk of these valuable things ultimately would go to a person who may be the original seller of Bitcoin. Needless to say, some amount as profit will surely go to other members that are not the initial producer of Bitcoins. Bitcoin Cash Token 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 in to the system and make a huge profit.

Leave a Reply

Comment
Name*
Mail*
Website*