Who should invest in bitcoin (crypto currencies)
There are divergent views on crypto currencies. Half say invest in them and the other half say don’t invest in them. So why are there such opposing views?
One answer may be found looking at history and financial bubbless.
Bitcoin and Money?
Bitcoin may be considered a form of money.
The two most important elements in the slippery concept of money are confidence and trust. Confidence that if you take money you can trust that another party will take it for their goods or services. Without confidence is hard to get and once lost very dificult, if not impossible to get back. Currently bitcoin does have a degree of confidence as money but it is limited and small in comparison to other forms of money that exist, i.e., gold, U.S. Dollar.
Another important element of money is that it has an authorizing agencey or Government.
For instance, in the case of th U.S. Dollar the good faith and credit of the U.S. economy stands behind it. The authorizing agency is the U. S. Government. The U.S. Government has given its dollar as “legal Tender”, i.e., it will be accepted in payment of taxes, or any other goods or services. This acceptance is a matter of fact worlwide.
Back to bitcoin
So back to the point of bitcoin and why peoples view it so differently. Bitcoin has no Country or countries economic support behind it. Currently, bitcoion has been gaining acceptance both in the US and abroad. However, if people begin to loose the faith that they can use bitcoin to purchase a good or service then the support for it could evaborate. So yes bitcoin is a form of money. In the early days of our country, before the constitution diferent states had diferent currencies that could be used to purchase goods and services. If there was enough confidence in a certian states currency then it could be used to purchase items in olther states. For example todayt bicoin cannot be used to pay taxes of any country. So while it can be used to be a very limited way to purchae goods and services it is not accepted just anywhere. So when you buy bitcoin you are believing that its acceptance will continue to grow or your buying speculating its value to the market will increase.
When a Country issues money then it is backed by the countries economy and the good faith credit the countries economy will remain strong.
On the other hand btcoin has no such support. So you ask what give it its value?
The value is similar to the value given a stock certificate. But even in a stock certificate you have the earnings, management and business of the underlying company to support the stock certificate. When you have a dollar and purchase stock in a company you are looking for th value of that stock to rise. The stock is not money.
So bitcoin is more like that stock certificate and you are purchaing it with hopes that its value will rise. Of course, this is the definition of a speculative investment. Both stock and bitcoin should be classified as speculative investments. And this is why fifty percent of the people you ask will say do not buy bitcoin.
What is Driving Increase in Price of Bitcoin is it a Bubble?
Bitcoin tremendous price increases in such a short period of time are clasic signs of a speculative bubble. A historical exalmples was the Tulup mania bubble, 1636-163.
Fortunes are made and lost in bubbles however, as in the case of Tuluip Mania once the bubble burst then investors are left with nothing. (Shortly we will be posting historical review of Tulip Mania Bubble)
TIMING IS ALL IMPORTANT IN ANY INVESTMENT BUT MORE SO WHEN YOU SEE WHAT MAY BE BUBBLE.
We do not offer investment advice. All writings on this site are offered as information and solely expresses our opinion. Every investor should research and study any investment before making it.
However, if you have decided to purchase bitcoin, Regal Assets, is the choice to make and will assist you in a prompt, responsive and professional, manner.
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Historically bitcoin has shown unbelievable return to its investors. Unlike gold bitcoin is not considered and asset and has no value other then what the market assigns to it.
A comparison is the internet stock of the nineties. Crypto currencies seem to be playing the same role as internet stock in the nineties.
This site can offer value to you our readers by providing historical data from various sources. We will also link to other site so you can have a rounded perspective. History can provide us a lens through which we can better understand current scenarios, hence, make better decisions. We hope you will find our posts and site informational and also help you avoid much of the minutia and get to the import points of the subject.
History of Bitcoin and the “Block Chain” Process
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“Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities.” [ https://en.wikipedia.org/wiki/History_of_bitcoin ]
In other words bitcoin is a digital currency, as opposed to say the US Dollar, which is paper currency. As such Bitcoin is medium of exchange whose value is determined by the market and parties involved in the transaction.
Blockchain — the system that processes and exchange of bit coins
Blockchain is a system in which transactions are made and recorded in cryptocurrency and are maintained and linked in a network.
Let us present this analogy for the process that occurs when a bitcoin transaction is made; — Let’s say you buy some groceries. When you pay for your groceries with US Dollars then if it were a bitcoin transaction the bitcoin would take be presented instead of the US Dollars.
What Happens After the Exchange — Groceries for Bitcoin?
Let know consider what happens after you have given the grocer your Bitcoin.
But first let us review what happens in a US Dollar exchange. After the sale at the grocery store then typically at the end of the day or next morning –those dollars from you are deposited in the stores bank in its account.
The process of accounting for this bank deposit transaction and all the deposits to the Bank are recorded and accounted for by a clearing house called the Federal Reserve. Currently one of the most used platforms for banking communications is ‘SWIFT”.
The website American Banker, has indicated — the ability for blockchain technology to replace “an old-fashioned payment settlement and messaging technology” called SWIFT was discussed. The conclusion was that blockchain could prove to be enormously transformational, potentially even replacing the SWIFT network for inter-bank payments. Next to that it seems as though blockchain could not only replace SWIFT but also increase the security, expediency, and accuracy of the system. To clarify, Blockchain is not Bitcoin think of Bitcoin and a dollar bill and Blockchain as the Federal Reserve and SWFT System. So American Banker is saying the technology behind Blockchain may offer a new and more efficient way to handle money transactions.
On the other hand crypto currency is handled by a process or system named “block chain”. We won’t go into the details of the block chain process here but will say that the computer process is designed to be secure, safe and private.
Because the process is private is not subject to review or intervention from Federal Reserve or Government there is no regulatory oversite, simply computer generated safeguards.
- This privacy is one of its appeals to investors.
- The process is also not subject to interference by governmental agencies which is another of its appeals.
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