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Should Bitcoin Replace Central Bank Currency?

Should Bitcoin Replace Central Bank Currency?
"""Differentiating Bitcoin from Central Bank Currency

Bitcoin is a virtual currency that is not authorized by a central bank, so its holder cannot tender it for exchange of goods and services like central bank authorized currencies can, but its holder may be able to transfer bitcoins to another account of a bitcoin member in exchange for goods and services and even central bank authorized currencies.

While short-term fluctuations in demand and supply of bank currency in money markets affect changes in borrowing costs, the face value of bank currency remains constant. In contrast, Bitcoin's face value and real value both change. We recently saw the split of Bitcoin, which is similar to how companies sometimes split shares of stock into two, five, or ten depending on the market value.

Companies are permitted to raise capital from the market, but these transactions are regulated, so as the total value of Bitcoins rises, the Bitcoin system will have the power to challenge central banks. When the original producers, including the miners, sell Bitcoin to the public, the market's money supply is reduced, but this money is not going to the central banks; instead, it goes to a few people who can act like a central bank.

Bitcoin trading is very speculative.

If there are more buyers than sellers, the price will rise, indicating that Bitcoin behaves like a virtual commodity that you can hoard and sell later for a profit. What if the price of Bitcoin drops? Of course, you will lose your money just like you would lose money in the stock market. There is also another way to acquire Bitcoins.

In the stock market, a stock's liquidity is determined by factors like the company's value, free float, supply and demand, etc. In the case of Bitcoin, it appears that free float and demand are the factors that determine its price. The high volatility of Bitcoin price is due to less free float and more demand. The value of the virtual company depends upon its members' experiences with Bitcoin transactions.

One major issue with this system of transaction is that no members can sell Bitcoin if they don't have one, which means you have to first acquire it by tendering something valuable you own or through Bitcoin mining. A significant portion of these valuable things ultimately go to a person who is the original seller of Bitcoin, with some amount going to other members who are not the original producer of Bitcoins as profit. Of course, some members will also lose the money they invested in these valuable things.

Private virtual currency known as bitcoin is unregulated.

People who own Bitcoins will be able to purchase enormous amounts of goods and services in the public domain, while those without Bitcoins will not be able to do so. Bitcoin is a virtual financial instrument, though it does not qualify to be a full-fledged currency, nor does it have legal sanctity. If Bitcoin holders set up private tribunal to settle their disputes arising out of Bitcoin transactions then they might not worry about legal sanctity."""
 

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"Should Bitcoin Replace Central Bank Currency?" was written by Mary under the Business category. It has been read 31 times and generated 0 comments. The article was created on and updated on 16 November 2022.
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