The Evolution of Bitcoin 
Snapshot is a monthly report that represents a Snapshot of the trending issues, addressing the most common questions, paving the way to drawing an insightful outlook on the near future shedding the light in specific on the MENA region.
The 21 st  Century has witnessed a huge shift to electronic payment systems, amid this change, digital currencies have been established introducing a new era of investment, saving and spending. With the rising global economic uncertainty, low-interest rates environment and political instabilities, resorting to digital currencies is becoming a global trend for investors seeking high-return. Yet, on the other hand, many view it as no more than a bubble. Bitcoin is the most popular form of digital currency and is increasingly growing in importance. It has been a constant source of controversy, but it is still not well understood.  
Question 1: What are crypto currencies?

  • Crypto currency is a medium of exchange, that is created and stored electronically in the block chain, using encryption technique to control the creation of monetary units and to verify the transfer of funds.
  • Crypto currencies have several characteristics including:
    • No Intrinsic Value
      Their value is driven by supply and demand and non-redeemable for another commodity.
    • No Physical Form
      As they exist only in the network
    • Its Supply is not Determined by a Central Bank
      As the network is completely decentralized.

Question 2: What is Bitcoin and how it began?
  • Bitcoin is a type of crypto currency. It is a peer-to-peer payment system that offers an alternative for brick and Mortar banking. Bitcoins are operated by a decentralized authority -unlike government-issued currencies- and can be exchanged for goods and services and also other currencies.
  • Simply, Bitcoin is a digital file that lists accounts like a ledger and people exchange money by changing this file where this file is saved on every computer of this network. 
  • For exampleif Ahmed bought a product from Mary worth 5 Bitcoins (BTC) then Mary's account will increase by 5 BTC and Ahmed's account will decreased by the same amount as illustrated.

  • Bitcoin was created in 2009 by Satoshi Nakamoto.
  • The following diagram shows how Bitcoin began:

Question 3: How did the evolution in value of Bitcoin happen?



Question 4: What are the potential risks and returns of investing in Bitcoin?
  • Currently, Bitcoin values more than 6,000 USD and hence is currently viewed as a high-return investment especially amid low interest-rates environment.
  • It has greatly outperformed gold where Bitcoin generated a 155% of annual returns, while, the precious metal has generated an annual loss of 6% in the last five years.
  • However, having a perceived value, Bitcoin's price valuation, from a lot of investors' opinions is only a bubble. 

Question 5: How to trade Bitcoin?

The bitcoin  has witnessed a huge spike, yet, it fluctuates at a very high level . Therefore, it is an extremely volatile investment and can be very susceptible to regulatory changes especially after the people's bank of China has issued a warning to its citizens about the riskiness of such an investment taking into consideration the effect of the Chinese regulations on the bitcoin market as previously mentioned and hence can be considered a good resort for risk taking investors who are willing to double their return for a high risk. However, for risk averse investors other substitutes might be a better option.
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