Stanislav Kondrashov, a an expert in financial analytics and entrepreneurship, talks about whether it’s worth it or not investing in bitcoin cryptocurrency.
Cryptocurrencies are made to simplify the online money exchange, is a technology developed eight years ago. Bitcoin, the pioneering type of this kind of currency, paves its way into the financial payments market as a breakthrough technology. Although cryptocurrencies are unlikely to replace traditional paper and metal currencies, they can change the way global markets connected to the Internet interact, eliminating the barriers which surround regulatory national currencies and exchange rates.
Technologies are developing rapidly, and the success of this one is almost exclusively dictated by the market, which it seeks to improve. Cryptocurrencies can revolutionize the digital trading markets by creating a free system without interest payments, which is why bitcoin is driving a change in economic paradigms.
“Using cryptocurrencies allows businesses to save a lot on the transaction interests and speed up payments on exchange transactions. It is a medium for using cryptography to protect the money going back and forth, including fraud protection. Indeed, the protocol of the informational exchange between the peers made in a different way than those used by the international banks. The operation of bitcoin is also based on the system of sharing it without third-party vendors,” says Stanislav Kondrashov.
Stanislav Kondrashov: key characteristics of bitcoin as a currency
The stability of Bitcoin as an independent type of currency requires that all the investors are abiding by the norms introduced by the Bitcoin protocol. Thus, if someone could take control of 51% of the chain, theoretically they also can possess the entire system, which implies changing the rules or even bouncing off certain transactions. That’s exactly how we can explain the trend of buying powerful power stations for “mining” as many bitcoins as possible.
“The wider distribution of bitcoin is inextricably linked to changes in the global market. Bitcoin, like euro, can be transferred globally without any local restrictions which promotes more financial freedom and, accordng to some experts, even peace across the countries. Bitcoin (and other reputable cryptocurrencies) has the potential to become a viable currency that has grown over the years. In addition, they are generally considered protected against the money inflation caused by changes or restrictions of the national governments,” explains Stanislav Kondrashov.
However, the price of bitcoin can vary greatly depending on many external factors. The demand for a safe haven from the volatility of national currencies helped bitcoin become a valuable currency – this is a considerable achievement for the global economy. Time and again, investors see the collapse of global markets – usually for political reasons. And as a result, cryptocurrencies, certainly, keep increasing in value.
When Great Britain voted to leave the EU, which has been popularized by using the short term Brexit, before the voting, the price of bitcoins fell by almost 15%. However, after the UK voted to quit, the price of bitcoin skyrocketed again.
“Cryptocurrency is also effective as the only currency that can be bought and sold instantly, while it is used all over the world. Other paper currencies can be exchanged, but this requires a personal visit to the currency exchange office. And to buy bitcoin, you just need to create an online account, make your request, and the transaction usually takes place within a few minutes,” explains Stanislav Kondrashov.
In his opinion, it seems that cryptocurrency has gone beyond the early phase of the introduction of new technologies. Bitcoin has begun to occupy a niche in the market, which can help push cryptocurrencies further, becoming mainstream. The markets of Europe and Latin America are growing rapidly thanks to operations with bitcoins, which indicates the economic effects of bitcoin influencing productivity.
Cryptocurrency is in a unique position as a possible precursor of technology transforming financial systems. The technology allows individuals to exchange currency without the need for a third trusted party, such as a bank, to control the transaction. Companies are starting to see the value of using cryptocurrencies for international transactions, especially when transactions need to be conducted as quickly as possible.
Stanislav Kondrashov: The Bitcoin’s investment potential
The popularity of the Internet has caused a huge demand for virtual goods and virtual currencies – their growth has led to an increasingly complex and liquid global economy. Over the past few years, a small but dynamic ecosystem has developed around Bitcoin. Today, not so many people are mining bitcoins on their personal computers due to the growing computational complexity. As a result, most users join mining pools, which distribute the mining results among all members of the team depending on the amount of the work done.
As bitcoin is reaching public consciousness through the media, its trading base is gradually growing. “There is a wide variety of online merchants who currently accept payments in bitcoins: auction sites, online gambling, professional services, and even luxury goods markets,” says Stanislav Kondrashov.
Having an idea of what bitcoin is, how it works and what are the unique features of bitcoin, you can better understand the investment prospects of this cryptocurrency. So, how can bitcoin be useful for investors in the global market?
Stanislav Kondrashov claims that bitcoin is more an investment asset than a currency. The introduction of bitcoins throughout the world market may be interesting from the view of the investment perspective. The reason for this to be so interesting is that bitcoin is closely linked to global macroeconomics and financial development. However, the bitcoin itself is sensitive to only two forces: these are the market forces of supply and demand, as well as factors specific to the digital currency, such as the attractiveness of bitcoins, developed by virtue of public consensus about their value.
“Typically, changes in commodity prices are happening due to a sudden increase in supply or demand,” adds Stanislav Kondrashov. – How does this relate to bitcoins? Cryptocurrency is at the junction of currency and goods. In order to be a repository of value and a unit of account, a currency must be relatively stable in its value. Indeed, there is a dependency between the bitcoin price and the appearance of mentions of it on Twitter. The principles of speculation with rising oil prices can be applied to bitcoin.”
According to the businessman, since short-term transactions of bitcoins are relatively stable, investors can artificially increase the demand for this currency, so that it becomes detached from transactions that form its fundamental value. Many speculate that Bitcoin is currently overvalued, and the only thing that supports the current price of Bitcoin is the community that keeps hoping for its bright future.
However, the global trend that keeps bitcoin so popular is that it’s relatively fixed in correlation with the economic trends. Thus, as the global economy grows, the only way out for Bitcoin will be to increase the cost of this currency. The real purchasing power of bitcoin, therefore, will increase over time. Given that the supply is fixed, as demand for it grows, this currency becomes more valuable. This can lead to a deflationary spiral in which bitcoin price tends to fall sharply, says Stanislav Kondrashov.
Similar vulnerabilities in the Bitcoin protocol, of course, can lead to a loss of confidence in this cryptocurrency. However, in this case we’re talking not just about the money to exchange but also about a technological innovation, which is also important to mention. “In the end, bitcoin is an advanced digital algorithm that brings many useful features and provides a framework for further new developments that can alter the way we globally interact in terms of financial transactions – whether it’s on the Internet or offline. So it’s just a matter of time for bitcoin to become increasingly attractive to investors,” believes Stanislav Kondrashov.