The mysterious and relatively new phenomenon of Bitcoin has financial professionals trying to figure out whether it’s a viable form of currency. Even people who use the virtual currency still don’t know exactly what it is they are trading.
People can use Bits to pay for anything, as long as the vendor accepts it as a payment. But what is it and why are people opting for this instead of traditional banking?
What is Bitcoin?
Bitcoin is known as the first “decentralized currency,” a cryptocurrrency and international payment system that’s not tied to any banks or central administrators.
Here are some fast facts about this perplexing system:
- As of December 27, 2017, one ‘coin’ costs about $15,740. This number fluctuates – a lot.
- There is no $16,000 coin to place in your pocket. That’s because there is no physical backing.
- Bitcoin can be broken down into approximately eight decimal places. In other words, users are able to send others as little as .00000001.
- People compare it to Wikipedia, because both are run through “decentralized networks” of people. This unorganized network keeps track of all transactions.
Why do people use Bitcoin?
There are several reasons:
- Bitcoins can allow a person to purchase things anonymously: Unlike a debit card, no name is attached to the Bitcoin.
- There are no credit card fees attached to purchases.
- Making payments for goods or services in other countries is easier with Bitcoin. They are not yet regulated by governments like other forms of money.
- Some people believe they will increase in popularity and value, so they are stocking up on them, much like gold.
- Criminals have taken a liking to it because they can collect and give money without a name. It has also been increasingly used to demand and pay out ransoms, but the vast majority of transactions are for legal purchases, not illicit activities.
Bitcoin has even made its way to Wall Street, with brokers and investors buying, selling and trading futures through a Cboe Global Markets exchange. According to Time Magazine, Bitcoin has bounced its way onto Wall Street with a bang.
Is Bitcoin worth all the hype?
Bitcoin has received its fair share of criticism from industry giants, including JP Morgan Chase CEO Jamie Dimon and business magnate Warren Buffett. Dimon called it “a fraud,” while Buffett has warned investors to stay away.
It has been reported, though, that JP Morgan Chase has gotten into Bitcoin futures trading, despite assertions from its CEO that trading “won’t end well.”
As Bitcoin values continue to fluctuate — many in the financial world are using the term “bubble” to describe the currency. Think housing bubble, dot-com bubble, etc. Bubbles form when people are willing to pay more than what a product or service is worth.
Proponents on the other hand, argue that cryptocurrency is the way of the future. It protects against identity theft, and the technology that’s being used and created just to support Bitcoin is very valuable, they maintain.
Are you thinking of investing in Bitcoin?
Overall, Bitcoin has its advantages and disadvantages, and the biggest hurdle going forward is getting people and investors to understand what it is they are exploring.
Bitcoin is a volatile market, and there is a fair amount of fraudulent schemes related to trading. If you believe you are the victim of investment fraud, contact the office of Fishman Haygood today for help.