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A Guide to Investing with Bitcoin
Bitcoin caught fire in 2017 when it started trading at close to $20,000. It has since gone on to dip as low as $3000 in December but it has recovered and is trading again in five figures. Bitcoin offers a remarkable opportunity to make money, however, there are still many questions of whether you should invest in Bitcoin, or not. We will take a look at what Bitcoin brings to the fore and whether it makes for a good investment or not.
What is Bitcoin?
Bitcoin was launched in 2009 as a new form of currency called cryptocurrency. Cryptocurrency is one of the decentralized forms of currency that does not need a bank or government as intermediaries in making any kind of financial transactions. There are many other types of cryptocurrencies available, as well, but none seem to be doing as well as Bitcoin. That is why we take a look at what makes Bitcoin so special?
How does Bitcoin work?
That is one of the questions that arise. It is powered by a combination of peer-to-peer technology, which is a network of individuals, and works through software-driven cryptography. Basically, it is a currency that is backed by code rather than items that have a physical value.
A Bitcoin in the simplest of words is a computer file stored in a digital folder on a computer or a smartphone. It works on the basic law of supply and demand and as demand waxes and wanes, there is a lot of cause for unexpected rise and fall in Bitcoin price.
You can understand Bitcoin through the concept of following terms:
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Blockchain:
Bitcoin relies on an open-source code called blockchain, which, in return creates a public ledger that is shared. Transactions are ‘blocks’ and the codes are ‘chained’, which helps create a permanent record of every transaction.
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Private and Public Keys:
A Bitcoin wallet has two keys: public and private keys. These work hand-in-hand ensuring proof of authorization and allowing the owner to digitally sign transactions.
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Bitcoin Miners:
The members of the peer-to-peer platform are called miners. They independently confirm the transaction has taken place and they do this using high-speed computers. Miners are paid in Bitcoins for their efforts.
Bitcoin Buying – Pros and Cons:
We should probably take a look at the benefits and, of course, the problems of investing in bitcoin.
Cons:
Price Fluctuations:
Bitcoin price and the value fluctuates and it is very volatile and speculative. That does not offer a lot of hope if you are looking to make a lot of money and you have very little knowledge of how things work. The spike in 2017 was due to the increased rush of people flocking to buying Bitcoins, although, since then it has stabled and continues to be on the rise.
Limited Use:
The usage of Bitcoins apart from trading, of course, is very limited. It continues to grow, but it is not accepted by most of the online companies, at the moment. Last year, AT&T joined companies like Microsoft, Dish Network and, Overstock.com in accepting Bitcoin, however, it still has a long way to go before major companies can accept payments in Bitcoin.
Hacking Concerns:
Bitcoin backers continue to alleviate such concerns but the fact is that hacking concerns are one of the major reasons why it is not yet considered to be a safe and secure currency. There have been many high-profile hacks, including the infamous hack which resulted in more than $40 million in Bitcoin to be stolen.
Zero Protection:
As it is still a new mode of payment, Bitcoin is not backed by the likes of the Security Investor Protection Corporation. Cryptocurrency is a fantastic idea but the whole market has a long way to go in becoming an established currency and in becoming the new norm.
Pros:
Potential for Big Growth:
This goes without saying. People who had invested in Bitcoin early in 2010 and around that time, they managed to profit heavily with the spike in 2017. Pro-traders are still of the view that the current rise is no surprise and it will continue to grow and grow. They believe that Bitcoin will mature, and once it does, there will be greater trust and use, and, along with that, Bitcoin’s value only has one way to go and that is up.
Ability to Avoid Traditional Intermediaries:
The recent recessions, financial crisis, etc, have challenged the traditional intermediaries, majorly. Investors are welcoming the idea of a decentralized currency, which is not under the control of governments, banks, and is subject to changes based on political unrest. This makes Bitcoin, a potential gamechanger.
How to buy Bitcoin?
Is Bitcoin a good investment? If you think it is, then your next question is going to be about how to invest in Bitcoin? There are many ways, and we will tell you about them.
There are, in general, four ways of getting Bitcoins:
1) Cryptocurrency Exchanges:
The main way of buying Bitcoins is through one of the many exchanges, especially in the US. Robinhood is one of the major exchanges that offers many cryptocurrencies. It is available in almost all of the states of the USA. There are other exchanges as well like, Coinbase, Binance, and Bitstamp.
2) Bitcoin ATMs:
You can also purchase Bitcoin from one of the many Bitcoin ATMs spread across the US. There are more than 3000 Bitcoins, and you can find one near to your location if you Google it.
3) Peer-to-peer Purchases:
If you want to buy from other Bitcoin owners, you can do that, as well. This is done in the true spirit of cryptocurrency and one of the most popular ways of getting Bitcoin.
4) Bitcoin Mining:
This is one of the technical ways of getting Bitcoins. Although, it is also one of the toughest ways. Also, the cost of buying a fast computer and the technical expertise of mining Bitcoins makes it a slightly more inconvenient way of getting Bitcoins.
