Bitcoin and cryptocurrencies: Let’s clear some obvious doubts
Bitcoin or cryptos are still in a very infant stage in the world of finance, and a lot of people from all over the world are hearing the terms like “cryptocurrency” for the first time on a daily basis. What that means is there are lots of people who are getting into the bitcoin concept or trying to buy some crypto, do not have any idea of the original vision behind the cryptocurrency technology, or how it is radically different than our present state of finance and economy. Please continue reading this article to know more in this regard, or click here to review for some in-depth bitcoin lessons. In this article, we will try to answer some popular questions you and a lot of bitcoin newbies often ask.
Question-1: But the downside of the Bitcoin system could be the artificial or forced manipulation in Bitcoin price, right? Like, if you’re a very wealthy person, then you can buy a lot of bitcoin, and then you can influence the market as per you will – is that true?
Yes, that is very true, it’s economics 101 basically – supply and demand. The supply of Bitcoin is fixed, and no matter what, you can never obtain a single coin once the twenty-one million pool of Bitcoin is depleted. So, the investors today are speculating that more demand will come in the future, and the value of these bitcoins that they buy today will be worth more in the future. Because new investors are not going to be able to purchase it from some new company, there is no new Bitcoin coming out – they have to buy it from the current owners. But then it opens up to the risk that the question mentioned. If a new investor wants to increase the price of Bitcoin or manipulate it in any way, it’s easier because that supply is fixed. A large order in an exchange, and this happens all the time, can influence the whole market without a shred of doubt. For example, if someone wants to buy a large amount of Bitcoin, then the price of Bitcoin will go up for everyone. On the other hand, if someone wants to sell a large amount of Bitcoin, they can drastically reduce the price of the Bitcoin for everyone. So, yes, there are pros and cons, but there are the obvious benefits that outweigh the risk in the system.
Question-2: These larger corporations, like Facebook, IBM, and other corporations, are trying to get into the cryptocurrency market – but unlike Bitcoin, there is not a finite amount of Facebook bucks or whatever they’re trying to do. Would you say that Bitcoin is a featherbed if you’re trying to get more bang for your actual buck as opposed to these companies that are not accountable to anyone, and just basically printing their own cryptocurrency? Like you send them real money, and then they give you a facebook dollar in return.
Yes, that’s an excellent question, and it’s actually very very different to understand. It depends on what you’re trying to accomplish. So for an investor purchasing something like Bitcoin or Etherium probably has a higher risk-return composition and buying a stable coin or some sort of coins like a Facebook coin. What’s not clear today is whether these new chains are going to have similar economics to something like the bitcoins.