Is Bitcoin an Investment or a Currency?
By now, you’ve heard about the rise of Bitcoin and other cryptocurrencies. But, just because you’ve seen Bitcoin in the news, doesn’t mean that its uses are readily apparent. Many still wonder, “Is Bitcoin an investment or a currency?” The short answer is that it’s both. But, we’ll look into how Bitcoin has transformed since it’s inception and how people are using the technology today.
Bitcoin and other forms of cryptocurrency exist exclusively on computers. While this can be confusing for those that are used to going down to the store and paying for food with a twenty dollar bill, it doesn’t make it any less of a currency. That being said, without widespread adoption by consumers and industries, a currency is useless. So, when Bitcoin first came onto the scene, for all practical purposes, it was an investment. Buyers were investing in the idea of Bitcoin as a currency. The price of Bitcoin seesawed back and forth and most Bitcoin owners held on to their coins for fear of losing their money. Because such a large percentage of Bitcoin owners held onto their coins for so long, the currency wasn’t widely used as a medium to exchange goods and services. Let’s explore Bitcoin’s transition from investment to currency.
Bitcoin as an Investment
Bitcoin can be bought and sold on exchanges just like stocks, leading many to view it similarly to an investment. In fact, many early adopters of Bitcoin viewed it as an investment simply because there weren’t many places to spend the currency.
The cryptocurrency market can easily swing up or down by a substantial percentage each day. Yet, there is a significant upside in treating Bitcoin as an investment. The market is still very young, and many crypto-enthusiasts predict that Bitcoin will continue to rise in price.
When looking at their legal classification, Bitcoin gains are taxed similarly to a stock. According to CrytocurrencyFacts “In the U.S., cryptocurrency is legal, regulated, and when held for investment taxed as an investment property. This is good. It means you can keep a tally of your trades, treat them as capital gains, and then report to the IRS just as with any capital investment.” Despite the risks of such a new type of investment, Bitcoin is the most exciting asset of the 21st century because it’s the most popular and well-known digital currency. The major hurdle that Bitcoin had to cross (and is crossing) is adoption. To truly be a currency, more and more people and businesses had to start to use it.
Bitcoin as a Currency
The purpose of Bitcoin is to secure the exchange of goods in the digital square. So would Bitcoin be considered the currency of the future? One of the most important features when it comes to currency is that it is widely accepted as a way of monetary exchange. The general population should be able to easily understand that Bitcoin is a currency. However, since cryptocurrencies are a relatively new concept, people are still confused about how they work.
Another feature of a currency is that it has to be widely accepted and used by businesses. This is still not yet the case with Bitcoin, although progress is being made in that direction. For example, here’s our guide to all of the New Orleans businesses that accept Bitcoin. Most businesses do not accept Bitcoin just quite yet. And if they did, many customers are not in the mindset to use their Bitcoin as a way to pay for groceries, gas, clothes, or other staples. While Bitcoin may not be widely considered as a standard currency today, it doesn’t mean that it won’t one day reach that point in the future.
The world of cryptocurrency is constantly growing and evolving. Some developing economies that do not have access to banks or other ways to receive funds are finding that Bitcoin could be the answer to their currency access issue. With its ability to be easily moved from one country to the next, and its growing global adoption, the rest of the world may soon be able to use Bitcoin as a possible reigning currency of the future.
So Is Bitcoin an investment or a currency?
The best answer is that Bitcoin can be both. While many cryptocurrencies are still new and fluctuating, the future of Bitcoin as a viable investment is bright. Right now, Bitcoin is absolutely considered a currency. While it may not be the top currency of choice right now because of how new it is, the more that the world is educated about Bitcoin, the more common it will become. While Bitcoin and other cryptocurrencies are expanding in the economy, it’s safe to say that we’ll be learning more about the use and impact of this future currency.
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