The concept of cryptocurrency and digital currency is not new. Time and again we have been coming across both these terms. Globally, there has been an increase in the craze and the acceptance of cryptocurrency. In simple terms, cryptocurrency is now being used as a legal medium of exchange and allows investors to undertake much easier transactions using this type of currency. Many countries have come forward in acceptance of this currency model and have also developed legal regulations around the same.
Bitcoin and its growing investment interest
Bitcoin was launched in 2009, exactly a year after the global recession. This investment model initially aimed at removing any third party involved in user transactions. It deployed the philosophy of decentralized finance and blockchain technology.
Blockchain technology is nothing but multiple chains of transactions that are broken down into single ledgers. Each of these transactions is then stored in individual user computers making these transactions secure and transparent. Additionally, these transactions undergo complex problem-solving. This is known as mining. Across the globe, some data miners are validating each transaction to ensure that every user detail is secured.
Yet another added advantage of Bitcoin is the scheme of decentralized finance model. This means there is no involvement of any third party in your transactions. Buying, selling, and trading activities are undertaken using the user computer and the required funds reach the recipient through network connectivity. Unlike fiat currencies, central banks, regulatory agency, or tax authorities does not continuously monitor your transactions.
Following the legacy of Bitcoin, many other alternate coins also followed suit. As of today, there are more than 14K+ cryptocurrencies across the globe. However, the total market cap of Bitcoin is much higher than the market cap of all these currencies taken together.
Let us understand the key factors that make Bitcoin investments different from other cryptos in the market.
Liquidity in transactions: with the growing investment model and widespread acceptance, Bitcoin is by far the most liquid form of investment. As an investor, you can trade your coins for other traditional assets. This could include gold, silver, fiat currency, or even real estate. Yes, you heard it right. So your Bitcoin can now convert itself to another form of assets. All you need is a digital wallet created with any legitimate exchange in your country.
No risk of inflation: In the past, we have witnessed multiple market crashes, global pandemics, and work from home, growth development scores coming to an all-time low. Despite all the above situations, the price of Bitcoin remained the same. The market also witnessed Bitcoin prices reaching an all-time high of $60K in 2021. Currently, the same coin is priced at $35-$40k per coin. During the initial launch phase, the price of one Bitcoin was $1 and the same has now increased at 400%. The coin has proved that it is susceptible to market crashes and does not get affected by price variation.
User transaction is private: Every Bitcoin user is identified through multiple combinations of numerical keys. There is no name assigned to any user. The transactions are secure and do not allow room to trace back to the original user of each transaction. Also, as compared to traditional transactions, there is no need for a user to declare any private credential to complete a transaction. Every user transaction is completed by verifying the private key and dual authentication process as set up by the user. Even if your digital wallet details are lost, there is always room to choose a new digital wallet making user transactions secure.
Similar to other cryptocurrencies, Bitcoin is also subjected to price volatility and market fluctuation. There is an increasing demand for this investment model. Considering the growing interests, even countries are coming forward in accepting this investment model. The most recent to join this list is India. During the recent budget session, the government has announced tax implications on crypto investments. This is the first step towards its acceptance where the economy would benefit from this investment model. While there are other cryptos in the market, indeed, Bitcoin is here to stay. The mining activity shall continue until the release of the last Bitcoin in 2040. Also, you must know should you be investing in stablecoins.