Bitcoin today is a widely used and successful crypto asset that is worth over $60,000. It is deemed a safe-haven asset by investors and the new digital gold. But the emergence of Bitcoin marks the emergence of a new kind of sound money – cryptocurrencies. Let’s take a look at how Bitcoin achieves sound money status as a completely digital and distributed cryptocurrency.
What Constitutes as Sound Money?
When it comes to sound money, it is defined as an asset that has purchasing power totally based on the interactions of the markets. In other words, it is independent of any external influence, by the governments, for example.
One example of sound money is gold, as its value appreciates even in times of uncertainty. Fiat money or traditional currencies are also known as easy money in the sense that their supply is in the control of institutions like the central bank, and their value is impacted by the fluctuations of financial markets.
On the other hand, Bitcoin is a digital currency that was created by Satoshi Nakamoto with the purpose of being used as a medium of exchange, but its design was decentralized and peer-to-peer based, which meant that Bitcoin is the first cryptocurrency to function separately from the financial markets.
Moreover, the supply of BTC is limited to 21 million, and furthermore, the pace at which is new BTC is generated is fairly predictable, and it depends on the contribution of miners of the network. So, there isn’t a central authority in charge of the regulation of the supply of BTC, but every user of the network (the miners) has a total overview of the data and gets a block reward for verifying the blocks of transactions. In other words, it’s totally a self-sufficient and desterilized system (blockchain technology) that powers the success of the cryptocurrency, and it’s the main reason why Bitcoin is also considered sound money.
Because this is a distributed currency, its price forms on the crypto marketplace and under the influence of supply and demand; these marketplaces are known online trading platforms, and today, there is an abundance of options, including automated trading sites like https://yuanpaygroup.org/
The underlining technologies of the automated trading platform include Machine Learning, Natural Language Processing, and Deep Learning Technologies, which enable the system to adjust to changing market conditions immediately and conduct reliable market analysis. Another advantage is that the site is completely secure.
Another reason why Bitcoin is sound money is due to its performance and steady increase of its price, especially with the last bull cycle in 2020. As we said earlier, sound money is not affected by political crises and instability of the financial markets. What’s more, the value of Bitcoin appreciates even when there is global political or financial instability.
Actually, the price of Bitcoin keeps growing as the adoption of the cryptocurrency rises. We’ve seen a lot of companies like OKCupid, Overstock, Home Depot, Microsoft, and lately, brands like PayPal, Square that are supporting BTC, which further increases its demand.
In addition, the credibility of Bitcoin is established by the support of institutional investors. Actually, in 2020, a lot of accredited crypto trust funds like the Grayscale Bitcoin Trust, Osprey Bitcoin Trust, among many other brands, were making huge BTC investments. In conclusion, the future of money is definitely Bitcoin, which not only offers a hedge against inflation but also increases in value thanks to growing individual and institutional support.
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Review Bitcoin as Sound Money.