Bitcoin has now become an economic phenomenon. Obviously, a large number of people have heard about bitcoin, but only a few understand it. If we define bitcoin in short terms, it is a cryptocurrency or a digital currency that allows peer-to-peer transactions without involving banks and governments. It isn't a physical coin; and instead, it is a digital currency or a computer code that only exists digitally. It can only be stored and transferred digitally over the internet. Bitcoin is stored in virtual wallets and can be accessed with a mobile device or computer. Many people consider bitcoin a revolutionary asset as it allows transfers to be made digitally to even international borders. Also, start revolutionary trading with get more info.
However, now people are buying bitcoin as a financial investment asset while expecting its price to increase instead of using it to make transfers. So, the confusion here is that is bitcoin a financial asset or a currency? There is no clear side of the line where the bitcoin is, so let's understand it in depth.
Is Bitcoin a currency?
If we consider the traditional aspect, a currency is one that the government of the nation produces. For instance, U.S. Treasury produces bills and coins and distributes the money to the general public through banks. The money that the government issues is known as fiat money and the value of fiat money is backed by the government and not by any commodity or gold. The value of fiat money comes from its acceptance in the world as money, and it is valued on the basis of how useful it is in the economy.
Money serves three main functions in the economy: unit of account, medium of exchange, and store of value. In order to be a great medium of exchange, money should be accepted in the economy for the exchange of goods and services. Bitcoin is definitely a medium of exchange as it can be used to buy goods and services, and also today, more and more companies have started accepting bitcoin payments. Additionally, bitcoin is created as a person-to-person payment system that doesn't involve intermediaries for facilitating transactions. Bitcoin transactions take much time in confirming the transactions and aren't stable means the price of bitcoin isn't stable. People prefer a currency or medium of exchange that is stable and maintains its value over time. Bitcoin’s value has not been stable in history, and there are many reasons that influence its price.
Money also serves as a great store of value, but the stability of value is also crucial. Undoubtedly, bitcoin's value has grown unexpectedly, but the volatility in the market is a great reason why people avoid using it as a store of value. There have been many times in the past decade where bitcoin's price fell dramatically, and this is because of its volatile or unstable market. Volatility is the main hurdle to bitcoin’s acceptance as the currency.
Is Bitcoin a financial asset?
The line between bitcoin being a financial asset and money isn't clear. It is a fact that money is also a financial asset that is extremely liquid. All other financial assets are not as liquid as money but offer great returns on investment. Bitcoin was developed to be a currency, but there has been an increased demand for bitcoin as an investment asset. Bitcoin does make a speculative investment, and the speculation by investors has influence the price of bitcoin to increase rapidly that financial experts even recognize it as a financial bubble. This bubble tends to grow bigger and bigger over time. The institutional investors are taking the best advantage of the rising price of financial assets, while other people are afraid to take benefit of this opportunity and are missing it due to fear of losing their investments.
The prices of bitcoin fluctuate wildly, and this creates great excitement amongst investors, which attracts them to invest in it. Well, you must be highly educated or trained to invest in bitcoin, and you must have a proper understanding of its market and factors that drive its price. Make sure to take advantage of potential opportunities and don't miss the chance of making profits.
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