Bitcoin has gone by many names over the years, such as:
Digital money, digital gold, phishing currency, an investment asset, and the end of modern capitalism as we know it.
But with the bitcoin price hitting significant levels, it is time to rethink Bitcoin and how it is perceived.
In the following, we will answer a question:
Is Bitcoin a commodity or a currency? How is it perceived?
Bitcoin can be used to buy many things , such as buying art, food, cars, real estate ...
One of the earliest proofs of the Bitcoin concept came when Laszlo Hagnac bought two pizzas by paying 10,000 BTC for them.
This day is now celebrated as "Bitcoin Pizza Day".
Since then, more than 100,000 different websites and online stores have accepted Bitcoin as a payment method.
Later, Bitcoin moved away from being a currency in 2018, as the Ethereum currency replaced it as the most moving currency among traders and users.
The number of Bitcoin holders has increased, and this was inferred through the increase in the number of addresses holding bitcoin, as " Grayscale " noticed a remarkable increase in the number of Bitcoin holders, especially the number of people who have kept Bitcoin for more than three years compared to the speculators who transferred Bitcoin in the last 90 days.
Last, but not least, for a currency to be viable, it must have low volatility.
If a currency fluctuates too much, it is difficult to appropriately evaluate goods and services with it.
Especially when you have to be mindful of Bitcoin transaction times.
Where a commodity can be valued in bitcoin, and after a period of time the bitcoin rises or falls, so the value of the commodity becomes different, especially if the purchase process takes time.
Most traditional fiat currencies have an annual volatility of between 0.5% and 1% every 30-60 days.
Bitcoin fluctuates between 4-5% and sometimes much more.
At the time of writing this report, Bitcoin has risen 14.30% in the last 7 days, so Bitcoin is a far cry from the monetary stability.
Bitcoin as an investment:
What happens if we consider Bitcoin an investment asset, as it can be seen as something that can be bought and held in the hope that its price will rise.
Here we find two currents and two camps:
One current believes in Bitcoin and another is questioning of Bitcoin.
On the part of Bitcoin believers, there are companies such as "MicroStrategy" and "Square".
These two companies are considered pioneer investors in bitcoin, having together poured nearly $ 600 million into bitcoin.
These companies view Bitcoin as a distinct asset with a cash supply that exceeds the quantitative easing currently being used by some of the world's largest economies.
Michael Saylor, CEO of MicroStrategy believes that as central banks increase the process of printing money, this money becomes inflated and loses value.
Bitcoin on the other hand, no one or anything can change that.
As the total supply of Bitcoin is fixed and not inflated.
As a result, Bitcoin is seen by believers as an investment asset.
MicroStrategy saw a return on investment of $ 133 million, after investing $ 550 million.
The second feature that Bitcoin has and is praised by its believers is that it can reach those who do not have bank accounts
There are 2.5 billion adults in the world who do not use banks or any financial institutions to save or borrow.
Part of that is due to the banks' view of the profitability of this group vis-à-vis the costs of accessing it.
Another reason that makes Bitcoin special is its consistency and its high value in many cases, unlike some collapsing currencies that reflect the state of the economy, such as the Venezuelan Bolivar, the Lebanese Pound ...
When domestic monetary currencies decline, governments tend to restrict citizens' access to foreign currencies to prevent further devaluation.
In addition, banks see that getting involved in banking for citizens of these volatile currencies is risky, which keeps them out of those markets.
While Bitcoin has features that make it an ideal investment asset for many third-world residents.
But not everyone sees it this way.
Others consider Bitcoin a risky investment vehicle, as it does not adhere to and align with structures and institutions.
In an IPE Foundation publication aimed at institutional investors in Europe, he explains and recommends the need to move away from Bitcoin, and not view it as an investment, on the grounds that it does not have clear regulations on things like credit intermediation and regulation.
The post also argued that there is no reliable market for trading cryptocurrencies only for institutions, and the absence of large banks providing liquidity to traders.
Bitcoin as a commodity?
In the first part of the article we discussed Bitcoin as a currency and as an investment, and we discussed Bitcoin from that angle.
How about looking from the perspective that Bitcoin is a commodity?
As a reminder, a commodity is a commodity that can be exchanged for other goods of the same type.
Basically it can be said that a commodity produced by one producer is basically the same as that produced by another product.
Examples of real-world commodities:
Legumes
Go
beef
oil
natural gas
foreign currency
In recent years, more financial products have been added to the list of commodities, including Bitcoin.
In America, the Commodity Futures Trading Commission identified Bitcoin as a commodity in 2015.
But what does that mean in practice?
Commodities traditionally have price fluctuations against assets like property, or cash supplies like currencies, which makes them a fertile environment for speculators trying to anticipate the rise and fall of an asset and betting accordingly.
This is where you find futures trading, a market in which people try to predict which direction the commodity will swing in.
Since the launch of the first Bitcoin futures contract in December 2017 by the Chicago Stock Exchange (CBOE), futures contracts have proliferated, and now account for more than 75% of Bitcoin's total trading volume.
Said a spokesman for trading "AAX" platform , which is the first platform in the world backed by the London Stock Exchange, said:
Bitcoin volatility lends itself to futures trading.
Some of the biggest growth recorded on our platform has been around Bitcoin futures trading, as investors are increasingly looking for ways to diversify portfolios and protect their fortunes from inflation.
Bitcoin as a commodity appears to operate on two different investment horizons.
Daily short-term volatility and long-term speculation.
Additionally, Bitcoin is more a regulated commodity than a currency or an investment.
Thanks to the Chicago Stock Exchange, it set a standard for regulation that affected non-compliant platforms.
The most recent example is BitMEX, which has been described as an unregistered trading platform.
Because futures markets allow investors to speculate without having to hold the underlying asset, they have brought in institutional interest in Bitcoin, which has helped view Bitcoin more as a commodity than anything else.
Finally:
It can be said that the consideration of Bitcoin differs depending on the party that gives its opinion.
But in general, and in light of what has been discussed above, it can be said that Bitcoin is close to being a commodity more than anything else, as Bitcoin can be likened as a commodity to oil, the latter that can be invested in and speculated on or traded as a futures contract.
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