Initially, many people were skeptical about Bitcoin and other digital assets. They never thought that this virtual currency could compete with traditional holdings at some point. However, Bitcoin is now among the most popular digital assets. While more cryptocurrencies are emerging following the success of Bitcoin, this digital asset remains the most popular.
But the surge in Bitcoin’s popularity and its impact on the traditional financial and banking sector can have far-reaching consequences. Banks and ordinary customers will feel the effects of these virtual currencies. Therefore, understanding Bitcoin can help you use or interact with it better, whether you opt to trade or invest in it.
What is Bitcoin?
Perhaps, you have heard people talk about Bitcoin or read about it online. However, you may not know much about this virtual currency. As hinted, Bitcoin is a form of money existing entirely online. That means Bitcoin doesn’t have a physical version. Instead, it exists on the blockchain that stores transaction data in blocks. Using this virtual currency enables individuals to protect personally identifying information.
Bitcoin doesn’t have the backing of a traditional financial institution like a bank. However, blockchain encrypts all transaction details to keep the users’ information private. While the popularity of this virtual currency has snowballed over the years, not all merchants accept it.
Nevertheless, people continue to purchase Bitcoin through platforms like trustpedia.io/brokers-reviews/plus500/. Also called crypto exchanges, these platforms allow people to exchange fiat money with bitcoins. After buying bitcoins, you can transfer them to a digital wallet to spend them on purchases from merchants that accept virtual currencies.
Why Bitcoin Became Popular
Perhaps, you’re wondering why so many people are interested in a virtual currency that lacks any entity or government backing. Well, online transaction security was the primary selling point for Bitcoin. However, this cryptocurrency provided investment possibilities that attracted most people’s attention.
Bitcoin’s easy access provides a way to invest for individuals who couldn’t benefit from traditional assets and banking products. Here are the other benefits of Bitcoin that made it increasingly popular among the masses.
- Low transaction fees
- Easy access to Bitcoin investment opportunities
- Direct investment control
These benefits enabled Bitcoin to rise from skepticism back in 2009 to one of the most sought-after digital assets one decade later.
What are the primary downsides to Bitcoin?
Anything that has pros always has some cons, and Bitcoin is no different. While this virtual currency may seem like the best and most beneficial investment opportunity, it has the following drawbacks:
- Bitcoin is highly volatile
- Bitcoin lacks supervision or regulation
- It lacks an inherent value
- Fast growth comes with infrastructure instability
How Bitcoin compares to traditional investments
With Bitcoin gaining massive popularity as an investment, investors want to select a more convenient option. Therefore, individuals that may otherwise invest in traditional assets are turning to Bitcoin. And this could lead to business reduction for investment companies and banks. Such an impact could have far-reaching consequences.
Nevertheless, Bitcoin’s value lacks the backing of anything. Therefore, Bitcoin investments can be unpredictable. And this explains why banks may not accept this virtual currency any time soon. Some people argue that Bitcoin investment opportunities lack stability. Additionally, you can’t use a Bitcoin investment to secure a loan, mortgage, or other financial services.
Bitcoin presents something new to most people. While some individuals have raised questions about Bitcoin’s ability to serve as a currency and a payment system, its popularity grows. What’s more, merchants across the world are embracing and adopting Bitcoin as a payment system. More individual and institutional investors are also purchasing Bitcoin and using it for value storage. Thus, how Bitcoin’s future will turn out is a wait-and-see matter.