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Charles M Vaughn

by Gary Swiercz Chicago 9 days ago in bitcoin

Charles M Vaughn on Bitcoin Investment

Charles M Vaughn says bitcoins have been in the news a lot lately for all sorts of reasons. On one hand, countries like El Salvador have recognized bitcoin as legal tender, on the other hand, countries like China have banned bitcoin mining due to regulatory and environmental issues. So what is the truth of bitcoin? Before Charles M Vaughn answer this question we must establish a few things about bitcoin and/or other cryptocurrencies.

What is a cryptocurrency?

Bitcoin, which is the first and most popular of many cryptocurrencies, was introduced in 2008, in the wake of the global financial crisis. Cryptocurrencies were meant to rival and provide an alternative to fiat currencies and the banking system that regulates fiat currencies.

Cryptocurrencies are thus

  • Not issued or regulated by banks.
  • Maintained through decentralized ledger technology, which makes them virtually unhackable.
  • Provide instantaneous transfer of funds.
  • Have lower processing costs, due to the absence of any intermediary.
  • Immutable.

Now, this immediately poses a problem for the conventional banking system, Charles M Vaughn says. If bitcoin cannot be controlled, then the monetary authorities lose the ability to control the supply of money in the market.

Furthermore, bitcoin is based on distributed ledger technology (DLT), where the data processing is done independently through nodes and the data is kept on public and private blockchains. This creates certain regulatory concerns where countries cannot track the money trail on cryptocurrencies. This creates a loophole, allowing cryptocurrencies to be used for illicit activities.

Why did China ban bitcoin mining?

Recently, China banned the mining of bitcoins and this news sent shockwaves that resulted in the value of bitcoin crashing from $60K to $40K. Why did China ban the mining of bitcoin though? There are multiple reasons behind this decision but the main reason is that China aims to introduce its own “Smart Yuan”.

The “Smart Yuan” is meant to be a centrally controlled digital currency. Russia is also planning to launch the digital ruble. This shows that while governments cannot fully embrace unregulated and completely decentralized bitcoin, they are trying to capture the digital currency market by introducing their coins.

One reason stated by the Chinese regulatory authorities is that bitcoin mining is not good for the environment.

Before this decision, almost 70% of the total bitcoin mining was done in China. This gave China considerable leverage over the cryptocurrency market. Bitcoin mining requires a stupendous amount of electricity and China claimed that bitcoin mining was putting it off its 2050 net-zero emissions goal.

There is truth to this claim, Charles M Vaughn stated. At present, bitcoin mining consumes around 0.65% of global energy, which means that if bitcoins were a country, it would be included among the top 5 power consumers.

The more cryptocurrencies are mined, the more energy consumption is going to rise and this will, in turn, put pressure on the usage of fossil fuels, which will end up increasing carbon emissions.

Volatility

The volatility of bitcoins is another concern that makes governments reluctant to completely embrace it. Bitcoin and cryptocurrencies in general are marked by their high volatility. This makes them particularly profitable options for those who can time their trades perfectly.

This high volatility makes bitcoins a high risk and high yield investment asset but not suitable to be used as a medium of exchange. Fiat currencies that serve as a medium of exchange are marked by stability in value, which allows daily transactions to take place easily.

Charles M Vaughn mentioned bitcoins will continue to be seen as an investment asset that can yield high returns. However, over time as bitcoin mining becomes more sustainable and governments bring bitcoins under their regulatory cover, the volatility of bitcoins will reduce, making them more suitable to be used as a medium of exchange.

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Gary Swiercz Chicago

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Gary Swiercz Chicago
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