Bitcoin is virtual money which helps you to make any business or transaction online. People spend real money to buy bitcoins. It was thought that the bitcoins would increase in value and many started to invest a lot in the bitcoins. However, in reality, the value of the bitcoins was $1200 previously and it reduced to $700. The value can either go very low or very high. One cannot depend fully on an independent digital currency.
Real money has three characteristics. The first characteristic is that one should be able to count money. The second feature is that the real money should be able to buy another commodity. The bitcoins have the above two characteristics. The last character is that the money should have a medium of exchange. An element would be agreed as real money only when it is approved by many organizations and communities and the user should be able to use it whenever they feel like. The bitcoins fail in this feature. The bitcoins cannot be used in a bakery to buy bread and the cyber theft threats are very high. As of now, due to the above said reason, the bitcoins are not seen as an alternative for the government’s paper money. The reasons why bitcoins have failed as a currency is explained by Richard Livingston of the Sydney Morning Herald.
If more countries approve bitcoin as a medium of exchange, the value of the bitcoin would increase with another digit, in a few months. If some countries ban it, as cyber security is tough to handle, the value would decline heavily. Due to this instability in the value, the bitcoin can never become a value of storage, as of now. This is the same case with gold, but gold has 1000 of years of history, as a medium of exchange. However, bitcoins have been into usage only for about 5 years.
Tammy Richards is a seasoned finance writer with over 15 years of experience in the industry. With a keen eye for detail and a passion for helping people make smart money decisions, Tammy has become a trusted voice in the world of personal finance. Holding an MBA and drawing from her extensive entrepreneurial background, she offers valuable insights and practical advice to her readers.
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