Understanding Bitcoins and Assets
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Understanding Bitcoins and Assets

Each Bitcoin can be transferred from one user to the other without the intermediary of a financial institution. This makes possible for an end user to end user transaction with little or no cost in the process. Bitcoins don’t have a physical presence apart from the record of transactions that are reflected or “stored” on the Blockchain. The current bitcoin value is determined by the demand and supply of bitcoins in an open market, as well as by the users who give and those who accept them. Bitcoins traded globally consists of end-user-to-end-user transactions, together with Over The Counter and tradeable exchange-based bitcoin. An existing small scale the United States bitcoin trading derivative market has emerged, with newcomers seeking Commodity Futures Trading Commission (CFTC) regulation of their activities in U.S.

Bitcoins are also spent for the purchase of goods and services by users. The bitcoin markets are volatile for traders and at the same time less liquid. To add to that, the risk associated with Bitcoin trading is very high, with many experts expressing the opinion that bitcoin investment has returns that are binary, meaning, bitcoins will command a high value or no value at all.

Part of the mystery or degree of uncertainty that clouds bitcoins come from the lack of the commonality about the intrinsic value of bitcoins. Contrary to fiat currencies and precious metals, it has been argued by critics that critics argue that bitcoins have no objective or inherent value. The proponents of bitcoin of Bitcoin often counter this statement saying that Bitcoin has value because of their ability to provide access to the Bitcoin network and the fact that they are used as a valuable asset and a medium of exchange in transactions.

Bitcoins don’t have the history of old traditions where the value was tied to precious metals; bitcoins are transferrable, fungible, easily divisible and seem to have a command of positive value relative to the production cost which is done through mining.

The history of Bitcoin trading shows that the perceived value of bitcoins comes mainly from trader’s speculation and the momentum of price movement in markets which have limited liquidity.

Currently, no consensus exists and limited market analysis has been done on bitcoin’s true intrinsic value, or that on the Bitcoin Network. Due to the structure of the Bitcoin Network which is peer-to-peer, recipients and transferors of bitcoins have the capacity to determine bitcoin’s value which has been transferred by barter or mutual agreement. These participants assess bitcoin’s current value by reference to the occurrence of price discovery on different Bitcoin exchanges, usually by daily trading values surveillance or the current bitcoin’s value price index. Throughout the world, Bitcoins are traded on exchanges, with each transactions valuation disclosed publicly, measured by different fiat currencies like the Chinese Yuan, the Euro or the U.S. Dollar.

Since the inception of bitcoin trading, prices on Bitcoin Exchanges have fluctuated heavily, and on a frequent basis during certain time periods. Since 2009, when the initial online quotation of a bitcoin-to-dollar exchange rate started, bitcoin’s price Experienced a low of $0.00 and a high of $1,242. This rate of change of prices of Bitcoin has had a huge significance, and their price considered to be “volatile” by many market participants and viewers. Despite its digital existence, bitcoins share a couple of characteristics with the gold bullion, these are: (i) there is a limited quantity of their availability and, therefore, an infinite supply will never be created  (ii) both can act as a store of value, (iii)  their market

prices are volatile and (iv) they are difficult and expensive to mine Bitcoins, in some ways, represent a hybrid of existing asset classes, and it may be best taken similar to other asset classes when certain specific circumstances occur. Bitcoin asset classification is defined by the specific use case at question. For instance, when used to transmit value to another individual.