Bitcoin is one of the most volatile currencies in the world. While volatility is considered a disadvantage of the currency by many financial experts, the constant change in the prices that usually happens unpredictably can be harmful if you are an investor involved in the crypto business. Volatility often becomes a serious reason why investors use the money during participating in the market as their investments can drop in value all of a sudden. Therefore volatility can be harmful to investment. But many people today find the volatility of crypto profitable because of the related advantages and in fact, lots of investors benefit from bitcoin’s volatility if they know how to take advantage of the volatile market.
Possible dangers for merchants
However, many people have great fears of the volatile bitcoin market because it’s the main reason why this digital currency can go up and down at any time and no one can predict what will happen next. Merchants are among those people who wouldn’t like bitcoin to grow in price. It’s not really difficult to find out why if you look at the current situation from their point of view.
Imagine that you own an e-commerce business where your customers can purchase things in bitcoin. In this case, increasing the price of BTC can actually harm your business nowadays. If years ago its price didn’t change drastically, now bitcoin can suddenly go up. Therefore, considering the possibility that the value of bitcoin can increase at any time, more likely people save their bitcoin instead of buying things from you which may result in losing the potential to profit. This is why merchants keep their fingers crossed and wish for the BTC not to grow in price.
Considering the related benefits, today people see bitcoin more as an investment than just a type of digital currency. As a result, many people prefer to deposit bitcoin rather than spend it to purchase products or services. For example, gamblers often deposit BTC on casino sites as many reliable websites accept bitcoin deposits and withdrawals. Depositing in bitcoin means that you are just transferring the ownership of your bitcoin instead of transferring the money. So, when a user deposits bitcoin into an exchange, they are entrusting them completely to keep it safe. Therefore, when the prices rise, people consider cryptos more as an investment which gives them lots of opportunities to gain benefits.
Why is bitcoin a good investment?
Today bitcoin can be used as a great investment and even more, sometimes it is even regarded as digital gold. It’s not a surprise considering the incredibly low fees of bitcoin you can trade with. The main reason why it is regarded as a profitable investment is high liquidity which means that no discount or premium is attached to an asset during buying or selling it. This is essential because it’s the exact factor that makes it easy to enter or exit the market. Also, the inflation risk related to investing in bitcoin, and even more, sometimes people say that bitcoin is immune to inflation. Indeed, you don’t need to worry that your cryptos ever lose value as the blockchain system is infinite.
You can also rely on bitcoin as an investment because in this case volatility is beneficial and unpredictable swings in prices may create chances for enormous gains. Besides, you can always make good use of bitcoin in trading because it doesn’t require holding a certificate or license to take part in trading. You can just buy or sell bitcoins from exchanges, place them in your electronic wallet, and make instant transactions.
Some of the features of bitcoin really make us believe that it can be called digital gold. At least, we can compare bitcoin to gold as they actually share some properties. Due to the weak relationship with stocks and all the other types of assets, bitcoin is frequently regarded as a digital form of gold, and indeed, since its supply is more than 21 million coins, today you can find lots of articles where financial experts compare bitcoin to gold.
We can see several similarities and playing the role of medium of exchange is among them. In fact, both gold and bitcoin are mediums of exchange because they can be traded for products and services. Another similarity is about units of account. Specifically, gold can be divided into half or quarter ounces, and just like this, bitcoin can be divided down to one satoshi which is equivalent to 100 millionth of a bitcoin. However, their similarity in the store of value is arguable. Bitcoin really was a store of value in the past but now in the middle of an economic crisis, it has been acting more like a stock market recently and some people even claim that as a result of bitcoin being intangible, it has a zero intrinsic value.
However, many investors believe that bitcoin is digital gold because it keeps going higher and higher, and more and more people want to buy as much bitcoin as they can to ensure a safe future. Today the size of the cryptocurrency market has grown so much and bitcoin is by far the largest digital coin that is in circulation, making about 60% of the total market.
Finally, we can say that bitcoin is traditionally considered as a form of money and it can actually function as digital money because of its features. People can use bitcoin as an effective payment method because the process of transferring bitcoin to other people or companies, as well as making international transactions is pretty simple. However, there are many problems like security issues and price fluctuations which make it less favorable for everyday transactions. But today bitcoin is more like an investment than a currency because of its increased value.
Investors start to look at bitcoin as a financial asset that plays an important role in the economy. Therefore, people now tend to buy bitcoin as a financial investment instead of using it as money to buy goods or services from merchants and this is why they are so worried about the rise of bitcoin’s price as it poses a huge threat for their businesses. But their concerns are not going to change the fact that bitcoin is the most volatile currency nowadays and its price will highly likely continue to go up and down constantly.
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