Is Bitcoin a financial investment or money?

Is Bitcoin a financial investment or money? Here are attributes that make Bitcoin both a currency and financial investment.

Since 2008, Bitcoin has continued to grow in terms of adoption and popularity. Today, Bitcoin is a financial and cultural phenomenon. Many people already know about this cryptocurrency. However, some people don’t know whether Bitcoin is a financial investment or money.

Well, Bitcoin is a cryptocurrency. It’s an electronic currency that allows people to complete person-to-person transactions without involving a banking system. Since it is not physical money, you can’t keep Bitcoin in your wallet or purse.

Instead, it’s computer money in the form of a digital code that a person stores in a virtual wallet within cyberspace. You only access the bitcoins in your wallet from a smartphone app or computer.

Bitcoin is a revolutionary concept to some people since it allows individuals to transfer funds to each other across their national borders. However, some people have started to purchase this digital currency as a financial investment.

Platforms like Oil Profit allow individuals to buy and sell this cryptocurrency at any time for profit. Some individuals are purchasing and holding onto this virtual currency, hoping that its value will appreciate. Thus, people are using Bitcoin for more than transactions. So, is Bitcoin a financial asset or currency?

Bitcoin as Money

A nation’s government has traditionally been the currency producer. For instance, in the U.S., the United States Mint and the Bureau of Engraving and Printing create bills and coins for the citizens. And the Federal Reserve System distributes this money via the banking system.

Fiat money doesn’t have the backing of commodities like gold. Instead, the value of fiat currency originates from the general acceptance that it is money. In simple terms, people use the U.S coins and dollar bills as money because of their economical usage.

Any money serves as an exchange medium, value storage, and account unit. For money to act as an exchange medium, people must accept it for services and products. People use Bitcoin as an exchange medium in some places and outlets. The credibility of this cryptocurrency as an exchange medium is growing as more people and outlets adopt it.

Creators of Bitcoin wanted it to be a peer-to-peer system. However, Bitcoin transactions also occur between companies and consumers that act as intermediaries by facilitating transactions. Bitcoin transactions cost varying amounts depending on the crypto exchange that a user chooses.

Bitcoin also acts as a value storage. And the value of this cryptocurrency has been increasing over the years. Nevertheless, the volatility of this cryptocurrency has constantly threatened the value storage function of Bitcoin. Security problems like theft and hacking attacks have also affected the value storage function of this virtual currency.

This digital currency also serves as an account’s unit. That’s because people use it to measure the value of services and items. That’s why people can use it to purchase commodities and pay for services.

Essentially, Bitcoin has all the attributes of money. Thus, it qualifies to be called and used as digital money.

Bitcoin as a Financial Investment

Money is also a financial asset, only that it’s highly liquid and has no or little interest. Initially, Bitcoin was to serve as a currency. However, the increasing demand for this cryptocurrency, combined with its volatility, has made it a speculative investment.

Investors’ speculation has driven the prices of this cryptocurrency to increase so fast. Thus, some financial experts describe it as an economic bubble. And this occurs when an asset’s price diverges from the underlying fundamental value. It can also happen if the asset’s demand leads to increasing prices above the underlying value.

And the rising cost temps investors to purchase more of the investment asset, hoping for the continuation of the trend. However, this bubble can pop, leading to considerable losses. Thus, Bitcoin could be an investment, but the future could be uncertain.

Since Bitcoin has a limitation of 21 million coins, its demand and value might continue to increase. However, it’s not apparent whether people will continue to accept and use it.

Final Thoughts

Bitcoin is currently digital money and financial investment. That’s because it has the characteristics of money, and people are investing in it for profit.

*This is a featured post.

Source: PulseNG

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