Bitcoin is the leading cryptocurrency in the world. Currently, over 106 million entities are using Bitcoin and for various purposes. Millions of transactions using Bitcoin are taking place every month. El Salvador became the first country to accept Bitcoin as legal tender late last year. Other countries are still considering how to treat and regulate Bitcoin. You can own or transact using Bitcoin platforms like quantum ai and you can sign up today.

Is Bitcoin a Financial Asset?
Is Bitcoin a Financial Asset? Pixabay

What is Bitcoin?

Before we can understand whether Bitcoin is a financial asset, we must first understand it. Bitcoin is a digital currency that Satoshi Nakamoto launched in 2009. The launch came shortly after the financial crisis that many believe was caused by the practices of big companies and banks. Bitcoin came as a better and safer alternative to fiat currency.

Bitcoin is decentralized. This means that there are no third parties involved in Bitcoin transactions. In the traditional context, banks and other entities are involved in financial transactions. For example, your customers will pay you through your bank account. The bank can monitor and even suspend your bank account at any moment. Bitcoin is different.

Bitcoin as a Financial Asset

Even before I delve into the details of Bitcoin being a financial asset, you probably already realize that it is money. Just like the dollar or pound, Bitcoin is a currency used to pay and buy items. You can pay for your shopping using Bitcoins instead of cash. As a business owner, you can accept Bitcoin payments.

Assets are categorized into real, intangible assets, and financial. Real or tangible assets include land, moto vehicles, and property. These are in physical form and have inherent value. Intangible assets are valuable properties that are not in physical form. Examples include intellectual property and patents.

Financial assets fall in between the real and intangible assets. They are non-physical in nature. Their value does not come from their physical status. Instead, the value comes from contractual claims on some underlying asset. The underlying asset may be real or intangible. Overall, financial assets are liquid assets whose value is based on contractual rights or ownership. Mutual funds, cash, bonds, bank deposits, and stocks are financial assets.

Bitcoin is also a financial asset based on the definition and characteristics of a financial asset. To begin with, Bitcoin is not a real asset. It is virtual and cannot be in physical form. In fact, unlike fiat currency that can be in form of coins or notes, Bitcoin can only be in virtual form. Without a real physical form, the value of Bitcoin does not come from its physical form or features.

Additionally, Bitcoin has real value. Although the price of Bitcoin keeps changing, it has value and that is why it is accepted as payment and used as an investment portfolio. The current price of Bitcoin is about $23,160. The fact that it has such value makes it a financial asset.

Finally, Bitcoin is a store value. You can transfer wealth to another person using Bitcoin. You can also buy Bitcoin today and hold it as a store of value in to the future. The more Bitcoins you own, the wealthier you are. As the price of Bitcoin rises, your wealth also increases. Bitcoin also has purchasing power. You can use it to buy or pay for goods and services.

Take Away

Bitcoin is a financial asset. It has purchasing power and acts as a store of value. It is intangible and liquid. In fact, you can include Bitcoin in your investment portfolio because it is a financial asset.