Cryptocurrency’s have taken the world by storm, and the concept is resonating with individuals and investors alike.  A cryptocurrency, such as bitcoin, do not have a monetary authority that is setting the rate or increasing amount of currency available. A cryptocurrency is more like gold than a currency, as there is a finite amount that can be mined.

Bitcoin, upon introduction, was limited to 21-billion, but the amount is not as important as the fact that the amount was capped.  The supply is limited as opposed to the U.S. dollar which has an infinite supply which can be managed by the U.S. Department of Treasury and the Federal Reserve.  With bitcoin, there is nobody that can change the value except for market participants.

Bitcoin Faces Scrutiny

Bitcoin, which is currently the benchmark digital currency has soared in value over the past 12-months rising more than 700% before experiencing some volatility.  In September, the Chinese government decided to ban initial coin offerings, which makes introducing new cryptocurrencies in China impossible.

This initial announcement in China was followed up by a report that said that China is considering closing off cryptocurrency exchanges. By denying ICOs and cryptocurrency exchanges, China is attempting to wipe out a competing currency, and will bring into question the legitimacy of Bitcoin and its ability to gain wide spread acceptance.  Cryptocurrencies are a different way of using currency and in regulated counties such as China this could be a problem.

In addition to the bans placed by China, Bitcoin has faced scrutiny from big banks. The Chairman and CEO of JP Morgan Chase, Jamie Dimond, said in an interview that he believes that bitcoin was a fraud and that the run up in prices were similar to the tulip fad in Holland.  He believes that once people understand that bitcoin is not different than other fads, the price will fall back to earth.

Why is Bitcoin Attractive

Bitcoin technology is designed to eliminate fraud and is based blockchain technology. Blockchain technology is based on the concept that each transaction is kept forever, and can never be deleted.  Blockchain technology is being pushed by IBM and Microsoft, as ways that companies to authenticate production on numerous products such as organic produce and certificates of authenticity.

How Can You Buy and Sell Bitcoin?

Bitcoin trading is active and can be completed by exchanging a currency for a digital currency. Coinbase, is an application that allows you to exchange your own currency for a cryptocurrency. Coinbase is an app that you can download on your phone and link a new account to a credit card or a bank account. You can easily exchange your currency for Bitcoin, and Bitcoin for your currency. Coinbase is also a trading platform. The platform offers margin trading for those who qualify, but it is gear for accredited investors rather than retail investors.

Bitcoin and cryptocurrencies have merit and the technology that is used to generate these currencies is here to stay. Peer to peer currencies is an interesting concept that is facing scrutiny from the establishment which should be expected as the market tries to change the way people think.

 

Contributed by : Umer Mahmood

 

 

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