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Financial Education Continued: Bitcoin


BITCOIN’S PRICE FLUCTUATIONS

I wish I bought Bitcoin when it first came out. My second wish would have not to buy that pizza in 2010! In May, 2010, a pizza worth $25 was bought for 10,000 Bitcoin (in today’s value, that pizza would have been worth approximately $3.8 Million Dollars)

Obviously, the price of Bitcoin has been on the rise. At one point hitting over $1,000 a Bitcoin, is there any stabilization? When it comes to the value of money, is there really stability? If money was stable in value, the Forex Markets would be boring and of no fluctuation in value for investors.

If you look at the overall rise in the value of Bitcoin, ignoring the extreme peaks, there has been a steady increase. However, I have yet to read any economic commentaries relating the rise of the value of Bitcoin to the relative loss of value of Fiat Currencies.  

The Stock Market Investment Specialist might take the side of buy and hold as I eluded to above with the value of the pizza. Of course in 2010 if 10,000 Bitcoin was the value of one pizza, then you buy the pizza, eat and don’t go hungry!

 

INVESTING IN BITCOIN

Since I have touched on it, I might as well bring up the subject of investing in Bitcoin. Most people don’t think about investing in Fiat Money as a viable means of investment. However, think about all those banking products that offer you interest. Isn’t this just about the same thing?

Your argument might be: money doesn’t grow in value! To this end, you might be right! Even adding the interest, at the end of the year, your buying power of your savings account is lower than the day of your deposit! With this, your money is actually losing value by holding onto it!

So, why would someone want to invest in Bitcoin? Recently, the government has listed Bitcoin as a Commodity. If it is now in the Commodities Market, then you can guess it will be treated as an investment. Guess what? Gold is in the Commodities Market as is Silver and etc. These are investments, right?

Just as you can “spend Bitcoin”, you can spend Gold. The value of investing in Bitcoin is different because it fits into other definitions so well.

 

THE DIVERSITY OF BITCOIN

I do not believe Bitcoin was developed for the purpose of being an investment. (It just comes with the territory.) The purpose of Bitcoin was to become a means of conveyance of payment in a more efficient and timely manner.

With all the advances of the Global Economy, the World of E-Commerce needed more than a bandaid to support the needs regarding payment systems. The inefficiency was weighing down productivity of E-Commerce.

Bitcoin to the rescue! At a time when the World Economy seemed to be crashing down around us, there is an emergence of an electronic monetary system called Bitcoin. The year was 2008 and the Stock Market was taking its toll on everyone’s Financial situations. The market was in a major correction (crash) and people couldn’t get their investments out of the way.

Over the course of the last 7 ½ years, Bitcoin begins to gain Global recognition. It may be some time in the making but what some view as a volatile monetary system, I see as a Global stabilizing remedy.

Find out more as you continue your Financial Education with us here at Compumatrix.

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