Bitcoin may be the digital gold of the current century
Before delving into this topic, let us first understand Bitcoin and the reasons for its growing popularity.
Bitcoin was launched in the year 2009 soon after the global economy suffered recession. The concept of Bitcoin was relatively new to everyone. Backed with blockchain technology and a decentralized finance model, Bitcoin soon became a hot cake amongst investors. The craze for investments grew and prices soared to new heights every year that cause Bitcoin effects on stock market. As of 2021, Bitcoin reached an all-time high of $60000 per coin. Now, this rise is not just due to the hype alone. Bitcoin does offer various advantages to its investors. One primary advantage is the ability to break down all your transactions into single blocks. Each of these blocks is then saved to user computers across the globe. This makes it difficult to trace back your transactions. Another advantage of Bitcoin is decentralized finance. This means there is no regulatory authority, central banks monitoring your transactions.
Can you use Bitcoin to buy products?
Yes, bitcoins can be used to buy products and services of your choice. Most showrooms and retail outlets today accept Bitcoin as a legal medium of exchange. With advancements in technology, it has become easier to carry transactions through bitcoins. Every transaction takes about 10 minutes for validating. As compared to fiat currencies, Bitcoin transactions are expensive.
Bitcoin and its ability to protect against inflation
Central banks do not regulate Bitcoins. These types of coins are 100% monitored and are always under the pressure of inflation. With Bitcoins the case is different. The supply of Bitcoin is limited and it is expected that by end of 2025 there will be 21000 Bitcoin in the market.
Why is Bitcoin different as compared to fiat currencies?
Not only Bitcoin, but any cryptocurrency for that matter also is not the same as fiat currencies. Fiat currencies are regulated and central banks monitor every transaction undertaken by its citizens. However, in the case of Bitcoin, there is no central agency monitoring your transactions. It is impossible to trace back to the owner of any transaction.
Is Bitcoin the new digital gold?
Gold is the safest investment option. This asset has stood the test of time and provided its investors with an easy return on investment as well. Considering the growing demand for gold, many exchanges and governments now make gold available in digital form as well. Another key factor is the advantage of gold is not impacted due to inflation as well.
Bitcoin and gold have similar characteristics. Bitcoin is volatile and prone to high risks market fluctuations. These price fluctuations and market volatility will continue to exist in the coming years as well.
Let us understand three important reasons as to why Bitcoin takes a similar role as digital gold –
High investment and speculation – Bitcoins are mostly used for investment purposes. The price per coin has increased from $1000 to $35000. Investors have received a huge return on investment during this period.
Limited trading option – There is always an imbalance in the supply and demand of Bitcoin. As of today, there are 18000 coins globally and this is expected to rise by 21000 in 2025. While the demand increases the supply of the same is not balanced. This is another reason for the increase in prices and provides a return on investment.
Bitcoin value is not expected to fall – with the growing demand for Bitcoin, it is predicted to note that the price is not reduced in the coming years. The cost of Bitcoin will continue to rise and this is another prominent reason for attracting investments globally.
Bitcoin is also not impacted by changing inflation rates. This is another important reason for the growing comparison between Bitcoin and gold. An eye-opener to this was the recent pandemic. Despite pandemics and lockdown hitting globally, the price of Bitcoin remained unchanged. This is another example of being non-vulnerable to outside threats.
Yet another attractive factor of Bitcoin investment is the growing demand for its regulations. Globally central banks and other regulatory authorities are reviewing Bitcoin transactions. We may soon expect regulations around the same.