The Future of Money: How Bitcoin is Changing Personal Finance Skills

The Future of Money: How Bitcoin is Changing Personal Finance Skills

Money is an essential resource that fuels the things we need for everyday survival. This has been the case for thousands of years—but money didn’t always take up the form of paper bills and metal coins.

Thousands of years ago, humans bought and sold things using stones, gold, Cowrie shells, and even leather. Go back even further, and you’ll find most people bartering with cattle like cows and sheep.

Nowadays, the prevailing currency in Australia and around the world comes in the form of paper cash and coins.

That said, the shift to cashless payment is evolving at a breakneck speed, with more Aussies choosing to pay using credit cards, smartphone apps, and digital payment services for ease of convenience.

Another recent and revolutionary addition to this roster of payment methods is cryptocurrency, specifically the most popular cryptocurrency called Bitcoin.

Bitcoin has introduced many different types of people into the world of financial literacy—and with its unprecedented growth in Q1 of 2024 and cryptocurrency ATMs opening left and right, its growth is certainly not a passing trend.

The future of finance is digital. Let’s look into seven ways Bitcoin changes how people interact and deal with their finances.

It Fosters Learning in Technical and Fundamental Terms

The promise of fast growth offered by various cryptocurrencies like Bitcoin is a major selling point for keen investors.

That said, the stark reality of potential losses can also occur if one’s not careful—and this has been a reality for many investors in the past.

Given the dynamic conditions that underlie the cryptocurrency market, many newbie investors seek to inform themselves with better technical knowledge and fundamental decision-making to maximise their profitability and mitigate losses.

This learning process is a lengthy approach that involves understanding blockchain technology and the economic and technical principles that underlie Bitcoin.

It also includes knowing how to read charts and technical indicators to know when to make investment decisions like whether to buy or sell. Keeping track of the Bitcoin price AUD isn’t enough—you also have to know when to strike using Bollinger Bands, RSI, and other technical techniques.

As more people become motivated to profit from Bitcoin, more people become motivated to improve their personal finance skills through studying technical and fundamental analysis.

This, in turn, can collectively raise the bar for financial literacy higher compared to the past—which is vital for shaping a more financially literate world and maximising the potential returns for everyday investors.

It Serves as a Jumpoff Point to Other Cryptocurrencies

Bitcoin is the most renowned cryptocurrency in the market, even years after its creation. It had its fair share of ups and downs, but it’s the first name people think of when they think of the word cryptocurrency.

The reason why it’s so popular lies in its maturity and mainstream adoption. It’s one of the first cryptocurrencies in the blockchain scene, solidifying its position as the premier and most mainstream cryptocurrency.

Furthermore, it’s also a mirror of the state of cryptocurrency at large—if it’s doing well, it raises the flag of all cryptocurrencies, generally speaking.

In a vacuum, Bitcoin is the equivalent of a blue-chip investment. Relative to other cryptocurrencies—of which there are thousands—its movements are not as volatile.

Given that, if someone wants to get exponentially high potential returns, they’d have to venture further out from the safer waters that is Bitcoin.

Once a person invests in Bitcoin and understands the concept of crypto investing, they can feel the pull of investing in other altcoins too.

Ethereum, Litecoin, Cardano, and DogeCoin are some altcoins that serve as high-potential alternatives to Bitcoin. That said, there are hundreds of smaller altcoins that can grow your wealth, you just have to research to pick the right one.

It Provides an Alternative Store to Traditional Financial Institutions

A compelling reason for people to invest in Bitcoin is its decentralised nature. This makes people more in control of their funds as opposed to the past when depositing in banks is considered as the only right way to save cash.

Depositing funds in conventional banks carries with it a slight vulnerability of loss due to the rare possibility of institutional failures, like a bankruptcy or unexpected shutdown.

If you generally hold a distrust towards banks and keep money in physical places like safes, then cryptocurrency can provide a safe alternative to store your money. This can be done in either hardware wallets or software wallets.

Moreover, Bitcoin allows individuals to exercise greater control over their funds, bypassing the need for intermediaries and reducing transaction fees common in banks.

This gives you more autonomy while handling your funds, all while having peace of mind knowing that it’s safely stored.

It Enhances Risk Assessment Skills

Investing in Bitcoin and other forms of cryptocurrency carries with it a higher degree of risk compared to other traditional investment vehicles like stocks and bonds.

Case in point, 2021 has seen unprecedented growth of Bitcoin, only for it to be followed by a sharp decline months later.

But come 2024, the anticipated halving period and other factors have caused Bitcoin’s value to shoot up again, higher than its previous peak.

There’s a learning curve in navigating the volatility of cryptocurrency markets. This environment forces investors to be on their feet when it comes to developing risk assessment skills, as a lot is on the line when making a bad investment decision.

It Encourages the Diversification of Assets

Diversification is a key philosophy in the world of investing—and cryptocurrency, particularly Bitcoin, embodies this principle by offering an alternative asset class outside traditional markets like stocks, bonds, and real estate.

Investing Bitcoin in your wealth portfolio helps protect you in case of economic downturn and shifting market conditions. By diversifying, you’re spreading your exposure across different asset classes, reducing the risk of one investment pulling you down.

Diversification is a solid investment strategy since it provides investors with a financial floor against volatility. Bitcoin is a good asset class to diversify in, which can push more Bitcoin investors to diversify in this class and in other ways.

Regulatory bodies around the world have different outlooks regarding cryptocurrency like Bitcoin. Some countries fully embrace it and accept it as a viable alternative form of currency. Others are more restrictive of it, even banning popular cryptocurrency exchanges.

Given this variance and the inherent volatile nature of cryptocurrency, it’s essential for investors to keep up with the trends to ensure that they’re compliant with the overarching policies of their nation.

But it’s not only their own country’s laws they have to consider. Knowing the global trends is important since it can affect market prices, allowing you to make informed investment decisions accordingly.

It Teaches The Value of Patience and Resilience

Investing in Bitcoin and other cryptocurrencies can be an emotionally charged experience. The highs can be very high, while the lows can be devastatingly low.

That’s why knowing how to stay rational despite being exposed to the volatile nature of this asset class is an important skill to become financially savvy.

In the face of lows, you have to be patient and resilient. Don’t make emotional decisions and instead think of the long-term implications of your decision.

Similarly, ensure that you keep your long-term goals in mind with every investment decision. While the lows can be heartbreaking, Bitcoin has historically jumped back from previous highs, making resilience a key value to have in this field.

 

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Chelsea Rogers

Chelsea Rogers

Chelsea Rogers is an aspiring journalist and marketing student based in Melbourne, Australia. She is passionate about growing her portfolio as a journalist and is particularly interested in social justice reporting. She is an avid music lover and regularly performs at local venues with her band.

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