In 2008, a new and novel currency came into existence with the straightforward name of Bitcoin. The original purpose of Bitcoin was to get around the need for central banks and send money to people around the world via the internet. Bitcoin’s role was to get around the need to exchange currency when transmitting money from one country to another.
However, there’s a catch: Bitcoin has to be mined using a computer. Once all of the coins are mined, no more will be created.
The idea of limiting the number of coins available for mining was originally intended to help increase the value of each Bitcoin over time. This all went out the window once investors and other actors discovered the ease of transferring money through Bitcoin without being tracked by law enforcement and governments around the world.
Bitcoin started out with a value of zero in 2009 and reached its record high in early May of $68,000 per coin. Investors and miners piled into the cryptocurrency en masse prior to its record high, driving the price up and down on the turn of a dime. One moment, Bitcoin was worth mid-five figures, then worth the low four figures the next. This volatility prompted billionaire investor Warren Buffett to refer to Bitcoin as “rat poison” early on in the rise of the cryptocurrency and has recently stated he wouldn’t pay $25 for all the existing bitcoins in the world.
Buffett’s stance that Bitcoin produces nothing tangible has merit. Indeed, there is nothing of value produced by Bitcoin, and it’s not backed by a business that provides a physical good or vital service. However, Buffett is making investments in cryptocurrency operations, albeit ones that are focused on brokering instead of mining or creating. These services are poised to shape the future of the financial […]
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