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Every day, more and more talk about Bitcoins is occurring, not only as a digital
currency, but also as a financial investment. Many people are intrigued by this
digital currency, but they also have reservations about it as well. For now we will
discuss how to evaluate bitcoins as an investment.
There are Bitcoin exchanges, just as there are stock market exchanges. As of
December 2013, the largest full-trading Bitcoin exchanges that are available to
everyone include Bitstamp (based in the United States), BTC-e (based in Bulgaria),
and Kraken (based in the United States). The world’s largest Bitcoin exchange,
BTC China, is based in China, but that exchange only allows exchanges of bitcoins
for Chinese Yuan/Renminbi.
In order to open an account with these exchanges, you usually have to link a bank
account to your Bitcoin exchange account, as you need to wire transfer the money
for bitcoins to use in your account. Credit cards and PayPal are not options [at
least not at the time of writing] because the transactions can be reversed very
easily, whereas a wire transfer cannot be reversed.
Usually, only bank accounts from that specific exchange’s home-based country can
be linked to the exchange account (for example, CoinBase, based in the U.S., only
allows U.S. bank accounts).
Like the financial stock markets, bitcoins fluctuate in value against real currencies
such as the U.S. Dollar, the Euro, the Japanese Yen, and others. One important
distinction between Bitcoins and real currencies to this point in Bitcoin’s history is
the fact that Bitcoin’s valuation has been much more volatile than real currencies.
In December 2013, Bitcoin’s valuation went from about $675 down to about $425
within twelve hours, about a 37% drop in valuation. That is virtually unheard of
with any real currency (barring something major like The Great Depression or some
other major economic event).
The reason that this sharp drop in valuation took place is because the People’s Bank
of China told third-party payment processors that they should have nothing more
to do with Bitcoin exchanges. As a result, Bitcoin kept getting cut off from being
supplied by the payment processors; in fact, Bitcoin was cut off by three payment
processors inside of a week. Banks have also been told to not deal with Bitcoin any
longer.!
awesome