Investors should still treat Bitcoin with care as the value is significantly based on speculation. The more people buy into Bitcoin, the higher its value. It’s similar to stocks and other trading. However, if belief in the system as a whole should falter, many investors will find themselves with Bitcoins that they’ll only be able to sell at a loss, if at all.
For this reason, some people have described Bitcoin as a “bubble” currency. It only has value as long as people assign it value, thus increasing the bubble. However, if the bubbles eventually bursts, many people will have to deal with the repercussions. This is a far cry away from bank and government regulated credit card processing systems.
However, the developer of Bitcoin did use technology to help ensure that Bitcoin would remain somewhat stable for a period of time. Bitcoins are created when computers solve complex mathematical creations, and the code was designed so that the equations become more difficult. Over time, the product of Bitcoins has slowed to imitate natural resources such as gold that are become more scarce over time. This has helped increase the value of Bitcoin.
The PC hardware required to complete those transactions has become more advanced, which makes getting into the creation more difficult now than when Bitcoin first started. Thus, large firms who have expendable capital are the main groups who are still mining Bitcoins. These parties have a greater influence over the price and stability, much like the 1% which controls most of the wealth in the United States. Because of this, some people are wary about investing in Bitcoins. If these people use that power to cause the bubble to burst after cashing out, Bitcoin could certainly seem like a scam.
On the other hand, every Bitcoin creation and transaction is recorded, which provides some transparency to the Bitcoin environment overall. This hasn’t stopped some people from using Bitcoin as a quick way to launder money, but those are the same people who would also use cash and other currencies to perform in illegal activities. Should law enforcement and judicial parties step in because of this, Bitcoin could be affected in the future.