Five things every investor needs to know about Bitcoin

With the instability of the global economy and the threat of economic crisis, investors are paying more and more attention to Bitcoin and recognizing its advantages over traditional assets and currencies. Many investors are still cautious about the volatility of Bitcoin prices. The following will introduce five aspects that every investor should know about Bitcoin.

1. Higher liquidity

In regions and countries with established Bitcoin infrastructure and regulations, Bitcoin has strong liquidity. Places like South Korea, Taiwan, and Switzerland offer Bitcoin services that are more convenient than most assets, sometimes even credit cards, mainly because of the existence of Bitcoin startups that allow local residents to store and facilitate the exchange of fiat currency and Bitcoin.

For some large traders, the daily trading volume can reach 100,000 US dollars. In some countries with strict regulatory rules (the United States, South Korea), the daily trading limit is even stricter. At the same time, investors must also face KYC (know your customer) policies and regulations, while traditional assets and banking systems need to implement stricter KYC and AML (anti-money laundering laws).

2. Lower volatility

Merchants and investors have often expressed concern about Bitcoin’s high volatility. However, since last year, Bitcoin’s volatility has substantially decreased, and it has even become more stable than the reserve currency, the British pound.

The reduction in Bitcoin's volatility makes it more capable of being used as a global currency, store of value and investment. More importantly, Bitcoin's price has been rising for six consecutive months, and more and more individual users and businesses are realizing that Bitcoin can cope with economic instability.

For example, Bitcoin trade and demand have surged in India and China over the past three months, largely due to local governments’ stringent capital controls and financial regulatory policies.

3. Tradability

Bitcoin is the only valuable asset and currency that investors can easily pay across borders today. Other forms of currency or assets (such as gold) have long been considered a safe haven for global assets, but they require third-party service providers or infrastructure to transfer during transactions, which is inefficient.

In addition, Bitcoin transaction fees are independent and do not depend on the transaction volume. This means that no matter how much Bitcoin an investor wants to send to a recipient, the average fee is $0.11. This fee applies to transactions of any size.

4. Decentralized nature

Bitcoin is decentralized. The digital currency is neither controlled nor manipulated by a centralized entity. That means no individual or third party can gain access to a user's Bitcoin.

Sometimes, due to the low liquidity of existing assets or currencies, investors have to think hard to make the best use of them. In most cases, this is mainly caused by the excessive protection of investors and user assets by central institutions. If an institution decides to hold or freeze investor assets under the requirements of laws and governments, investors will not be able to withdraw and liquidate their assets.

Using an uncontrolled Bitcoin wallet can prevent this from happening, investors can own Bitcoin without the consent of a third party. They can create a paper wallet or offline cold storage to ensure that the wallet platform or online service provider cannot obtain their Bitcoin.

5. Its value is increasing based on market demand

For digital currency, the value of Bitcoin depends only on market demand. It is not affected by government regulation or manipulation, unlike legal currency. The rise and fall of Bitcoin prices depends on market demand over a period of time.

However, there is an indirect link between Bitcoin prices and economic instability. Whenever a government enters a state of economic instability or imposes additional taxes on trade, users and investors rush to buy Bitcoin to protect their assets.

If this happens, the price of Bitcoin will rise as demand for the digital currency increases, and investors can take advantage of global market instability and increased regulation of cash to convert assets into Bitcoin.