Should Bitcoin replace the currency of Central Banks?

The difference between bitcoin’s “central bank currency”

What is the difference between a central bank authorized currency and bitcoin? The holder of the Central Bank authorized currency may simply offer it for the exchange of goods or services. The owner of Bitcoins can not offer it, as it is a virtual currency that is not authorized by the central bank. However, bitcoin owners can transfer bitcoins to another bitcoin member’s account for the exchange of goods, services, and even currencies authorized by the central bank.

Inflation will reduce the real value of the bank currency. Short-term fluctuations in the supply and demand of bank currency in the money markets affect the change in the value of borrowing. However, the face value remains the same. In the case of Bitcoin, its face value և real value changes. We have recently witnessed the split of Bitcoin. This is something like a stock market split. Companies sometimes split their shares into two or five or ten, depending on the market value. It will increase the volume of transactions. Therefore, while the intrinsic value of a currency decreases over a period of time, the intrinsic value of bitcoin increases as the demand for coins increases. Therefore, the accumulation of bitcoins automatically allows a person to make a profit. In addition, the original owners of bitcoins will have a huge advantage over other bitcoin holders who later entered the market. In this sense, bitcoin behaves as an asset, the value of which increases and decreases, as evidenced by price volatility.

When start-ups, including miners, sell bitcoin to the public, the money supply in the market decreases. However, this amount does not go to the central banks. Instead, it buys a few individuals who can act as a central bank. In fact, companies are allowed to raise capital from the market. However, these are regulated transactions. This means that as the total value of bitcoins increases, the bitcoin system will have the power to intervene in the monetary policy of central banks.

Bitcoin is highly speculative

How did you buy bitcoin? Naturally, someone has to sell it, sell it at a price that is determined by the bitcoin market, probably by the sellers themselves. If there are more buyers than sellers, the price goes up. This means that Bitcoin acts as a virtual product. You can save: sell them later to make a profit. What if the price of Bitcoin goes down? Of course, you will lose your money just like in the stock market. There is one way to get bitcoin through mining. Bitcoin mining is the process by which transactions are verified and added to a public registry, known as a chain, as well as the means by which new bitcoins are issued.

How liquid is bitcoin? It depends on the volume of transactions. The liquidity of a stock in the stock market depends on factors such as the value of the company, the free float, the demand և supply և etc. The high volatility of the Bitcoin price is due to less free flame and higher demand. The value of a virtual company depends on the experience of its members in bitcoin transactions. We can get helpful feedback from its members.

What could be the biggest problem in this transaction system? No member can sell Bitcoin if they do not have one. That means you have to get it first by offering something valuable or through bitcoin mining. Most of these valuables eventually go to the person who is the original bitcoin seller. Of course, a certain amount of money as a profit will certainly go to other members who are not the original producers of bitcoins. Some members will also lose their valuables. As the demand for bitcoins increases, the original seller can produce more bitcoins, as is done by central banks. As the price of bitcoin grows in their market, startup manufacturers can slowly release their bitcoins into the system to make huge profits.

Bitcoin is a private virtual financial instrument that is not regulated

Bitcoin is a virtual financial instrument, it does not correspond to being a full currency, it has no legal sanctity. If bitcoin owners set up a private tribunal to resolve their issues arising from bitcoin transactions, they may not worry about legal sanctity. Thus, it is a private virtual financial tool for unique people. People who own bitcoins will be able to buy huge amounts of goods and services in the public domain, which can destabilize the normal market. This will be a challenge for regulators. The inaction of regulators can create another financial crisis, as it happened during the financial crisis of 2007-08. As always, we can not judge the tip of the iceberg. We will not be able to predict what harm it will cause. Only in the last stage do we see everything, when we are not able to do anything except get out of the emergency to escape the crisis. This is what we live in when we start experimenting with the things we want to control. We have succeeded in some, we have failed in many or not without sacrifices or losses. Do we have to wait until we see everything?

Leave a comment

Your email address will not be published. Required fields are marked *