Cryptocurrencies & Why you should invest on them.

Cryptocurrencies can be defined as the future of currencies. They have received a lot of attention from people who live in every corner of the world. We can also find a large number of crypto currencies. Bitcoin and Ethereum are to name a few. Hence, it is important to have a clear understanding about the impact created on the economy by crypto currencies.

Its Bitcoin in a Bubble?

Bitcoin

We have been hearing a lot of news recently, claiming that Bitcoin is in a bubble. But when it comes to the reality, Bitcoin is not actually inside a bubble. The blockchain technology has gone through few significant developments in the recent past and now we can expect to see more advanced cryptocurrencies, which can be used to make transactions. If you do a simple research on Google, you will be able to get a clear understanding on how Bitcoin works and what’s the technology embedded within it.

It would be a good idea to deep dive and figure out why people call that Bitcoin is within a bubble. People in today’s world are purchasing Bitcoin for very high prices. Most of them are not purchasing Bitcoin for its original purpose, which is to enable secure transactions. Instead, people think of it as a potential investment opportunity.

It is true that Bitcoin can be used for transactions in today’s world. More than 100,000 businesses around the world now accept Bitcoin as a legitimate payment for their transactions. However, if more and more people continue purchasing Bitcoin entirely for investment purposes, we will come across a day in the near future, where it would burn. However, this fact has no grounds at all. Bitcoin is another transaction method and if we take a look at USD from the same viewpoint, we can see people piling up money in their savings account. They also think about saving money as an investment that is done towards the future.

Why cannot we replace Bitcoin with Gold or Silver?

As you already know, gold and silver can be considered as precious materials, which can be used as a form of investment. But why doesn’t the value of gold and silver don’t rise, as we can see in the value of Bitcoin? That’s mainly because the value of gold and silver is being manipulated by the central banks. Central banks own a majority of gold and silver reserves that can be found in the world and they are provided with the power to regulate it as per their specific needs and requirements.

The overall control of USD is centralized among different banks. This is the main reason why people tend to call it as central banks. The control and power resides within them. On the other hand, private individuals who were provided with the chance to use the currency illegally and wrongly are also controlled by the Federal Reserve Act.

No such restrictions can be found on Bitcoins as of now. However, we are not in a position to predict whether such restrictions would come into play in the future or not. We are only sure of one thing, that no such restrictions have been implemented on Bitcoin as of now.

What factors transform Bitcoin into a better store of value?

Bitcoin is a decentralized cryptocurrency by nature. It is a massive cryptocurrency as well. As a result, no central bank is in a position to take control over Bitcoin. In other words, the central banks are not provided with the ability to manipulate cryptocurrencies. Central bank owns printed money, which can be used to purchase assets like gold and silver. As a result, it has become easy for the central banks to take control over these assets. On the other hand, central banks are not in a position to implement a ban on Bitcoin as well. If the digital currency needs to be banned, all transactions that take place in the world should be stopped. It would be a worldwide effort, which is practically impossible for a central bank of a specific country to do.

Bitcoin is a cryptocurrency, which is extremely limited towards its supply. This is another factor, which differentiate Bitcoin from other assets and investment opportunities such as dollars, tulips and precious metals. Bitcoin was founded back in 2008. As per the capacity, only 21 million Bitcoins are possible to be minded. At the moment, we have reached 80% of the mining capacity. However, it would take several years for the remaining 2-% to be mined. That’s mainly because mining becomes slow and difficult along with time.

This limit is hard coded into the digital currency. Therefore, it is not a dynamic parameter, which changes its value from time to time. This is also the main feature that is responsible for making Bitcoin to store a specific value. When additional money comes in, the value of Bitcoin would further increase. This is another reason that can contribute towards the hike of Bitcoin in future.

People who live in all parts of the world are provided with the opportunity to purchase and own Bitcoin. In addition, they are gifted with the freedom to do transactions with Bitcoin without having any doubts on mind. According to the recent statistics, 7.3 billion people are living on this planet at the moment. If the 21 million Bitcoins need to be distributed among each and every person who lives on this planet, one person will need to be provided with 0.0028767 Bitcoins. This comes along with some practical difficulties as well.

The storage of Bitcoin transactions in a public ledger

All the transactions done via Bitcoin are stored within a public ledger. In other words, all the confirmed Bitcoin transactions would be included within a blockchain. This type of a decentralized bookkeeping system is less vulnerable to threats. It is more secure when compared to the centralized ledgers as well. This can be considered as another prominent reason, which has contributed towards the popularity of Bitcoin.

Conclusion

Bitcoin can be viewed as an excellent investment opportunity. A large number of people have realized this fact and they are engaged with the process of purchasing Bitcoin. However, we are not in a position to claim that Bitcoin is still within a bubble. If you take a look at the math behind Bitcoin, you will be able to get a clear understanding about this fact.

 

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