economics of the Bitcoin Bitcoins value with bitcoin price history.

economics of the Bitcoin Bitcoins value with bitcoin price history.

Today we’ll be looking at economics of the Bitcoin Bitcoins value with bitcoin price history. the economics of the Bitcoin. There are a lot of videos out there that keep articulating about the technology of the Bitcoin, What is bitcoin and how it works in the backend the.bitcoin value stuff. However at the end of the day it is still a currency. So let’s understand the economic side of the Bitcoin and the various factors that determine its value.

So let’s look at the

  •  Agenda 
  • Affect the Bitcoins value.
  • Bitcoin as an asset class 

Its value is determined by the market forces of supply and demand. Lets look at the first factor demand. Now there are two primary sources of demand for the bitcoin.

 Demand for the bitcoin.

Legal tender

Like any other currency first transaction of demand the Bitcoin has been accepted as a legal tender in some parts of the world. People in these areas use the Bitcoins to make daily purchases from coffees to cause.

speculation among speculators

The second type of demand is speculation among speculators use the Bitcoins deflationary nature to gain from it. Most of the Bitcoins demand is derived from this activity thus making it more volatile. The Bitcoin dies then there are instances of profit booking or panic selling.

Now we’ll be looking at some of the social economic factors that affect the Bitcoins value.

The first factor is one that we’ve already gone through.

Demand and supply the second are drivers of interest beyond the specialists initially drawn to the bitcoin as a solution to technical economic and political problems. Interest among the general public has historically been stimulated by banking blockades and fiat currency crisis banking blockades probably be the first such instance as the late 2010 WikiLeaks banking blockade whereby Visa MasterCard Western Union and PayPal ceased processing donations to WikiLeaks.

Following a request from Satoshi Julian Assange refrained from accepting bitcoin until midway through 2011.

Nevertheless this event. Shine a light on the Bitcoin its unique value as censorship resistant electronic money. The most recent such blockade occurred when MasterCard and Visa blacklisted Backpage dot com of Craigslist style list which lists inter alia adult services other services providers whose livelihood depends on such advertising have no way to pay for it.

Besides Bitcoin the Silk Route is another example of a time when Bitcoins have been used to pay for illegal activity. Fiat currency crisis as discussed a bit quiet while it can be a lot safer than a bank account Cypriots learn this the hard way when their savings were confiscated in early 2013 this event was reported ascausing a price surge as savers report the relative risks of banks versus the Bitcoin.

Economics of the Bitcoin Bitcoins value with bitcoin price history.

The next domino to fall was Greece where strict capital controls were imposed in 2015 Greeks were subjected to a daily withdrawal limit of 60 euros Bitcoin again demonstrated its value as money without central control. Soon after the Greek crisis China began to devalue the yuan as reported that the dying Chinese savers don’t do Bitcoin to protect their accumulated wealth. The next factor is market manipulation. Bitcoins all the time high above the $1000 mark was partly driven by an automated trading algorithms are but running on the mound gawks exchange all evidence suggests that these boards were operating fraudulently under the direction of a change operator. Markopoulos bidding up the price with phantom funds.

The last factor are price irregularities.

Sometimes an exchange price may be entirely different from the consensus price as occurred for a sustained period on the Mt. Gox bride its failure. And recently on the Winklevoss Gemini exchange in mid November 2015 the BTC USD hit twenty two hundred U.S. dollars on the Gemini while trading around just 330 U.S. dollars on other exchanges.

These trades were later reversed.

Such events occur occasionally across exchanges either due to human error or due to software. Now to evaluate bitcoin as an asset class like I mention speculators have been using the bitcoin for investments for the past years. Many years however due to the strong supply of the Bitcoin in the market the Bitcoin has been extremely volatile and prone to sentimental trading.

The problem is as all 21 million Bitcoins haven’t yet been mined the value is driven more by speculative demand than transaction demand.

Over the past year I have arranged many conferences on the bitcoin. I’m doing them. I’ve received a lot of queries from New investors looking at the bitcoin as an alternative asset class to fixed income and equity. My advice would be keep a majority of investments in fixed income and equity and trade the Bitcoin only as a risky growth investment.

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