With Bitcoin prices skyrocketing, many people are asking how to invest in Bitcoin. Today Bitcoin is the riskiest investment you can make, but there are also big risks in any form of investment. What makes Bitcoin so different? Here’s what you need to know before investing.For more information visit brexit-millionaire.org/.
What is Bitcoin?
Bitcoin was developed by computer programmers in 2009 and it’s based on peer-to-peer networks which mean transactions take place between users without an intermediary like a bank. It’s similar to sending cash digitally as opposed to paying for goods with a credit card or check that may be cleared through a middle man. Bitcoin isn’t regulated by any government. You can’t hold Bitcoin as if it were cash because it only exists digitally as records of transactions. Bitcoin can be traded for other currencies.
Pros of Bitcoin
- Anonymous accounts allow private transactions, which appeal to some users.
- Bitcoin is decentralized and there is no need for an intermediary like a bank or credit card company. This makes Bitcoin transactions cheaper as well as more secure as there’s less chance of fraud as you don’t need to give your name or any other personal details when buying Bitcoin. In addition, Bitcoin can’t be forged or counterfeited because it doesn’t rely on third parties coming into the transaction at all.
- Bitcoin has been skyrocketing in value, rising from under $1,000 a coin in January 2017 to nearly $20,000 a coin by December 2017. As more people invest in Bitcoin they contribute to Bitcoin demand, which increases Bitcoin value. Bitcoin isn’t tied to any other currency so it’s free to move up and down in value, whereas other currencies are influenced by their exchange rate with the U.S. dollar.
- Bitcoin has an advantage over gold as a store of value because Bitcoin is safe from bankruptcy or collapse. When governments print more money it diminishes the existing money supply, which decreases its worth. Bitcoin doesn’t rely on any government institutions for its success so there’s no chance Bitcoin could be devalued by a government printing more Bitcoin causing inflation.
- The limited supply of Bitcoin makes it deflationary by nature, rising in price as demand outstrips supply for this scarce asset.
Cons of Bitcoin
- – Bitcoin is a deflationary currency and it’s likely Bitcoin will continue to rise in value as demand exceeds the supply. If you buy Bitcoin, this makes Bitcoin less useful as an actual currency that people could use for transactions because Bitcoin becomes more valuable over time, which wouldn’t be good for business owners who want to sell products using Bitcoin.
- – Bitcoin prices can fluctuate wildly in a short period of time. Bitcoin lost nearly 18% in value in the two days after Thanksgiving 2017 and has also suffered major losses when China announced plans to ban Bitcoin exchanges. This volatility makes Bitcoin riskier than other options like money market accounts or even bonds.
Just like with other investments, you need to consider how much risk you’re willing to shoulder before investing in Bitcoin. Bitcoin is definitely risky since its value has fluctuated so much in a short amount of time, but it’s also riskier than other investments because Bitcoin isn’t regulated by any government entity. This makes Bitcoin more susceptible to security breaches which can result in you losing all your Bitcoin if someone hacks into the Bitcoin network and alters the records on how many Bitcoin you own. The following are some examples of major Bitcoin heists:
- February 2014: $5,400,000 worth of Bitcoin was stolen from the online black market website Sheep Marketplace, which immediately shut down once they noticed the theft.
- August 2012: Bitfloor was robbed of $250,000 worth of Bitcoin after hackers exploited an unencrypted wallet, gaining access to users’ Bitcoin wallets and stealing Bitcoin from Bitfloor’s Bitcoin wallet.
- December 2011: Bitcoinica was robbed of $90,000 worth of Bitcoin in a series of Bitcoin heists targeting Bitcoin wallets within Bitcoinica and Bitcoin wallet service provider TypeForm.
Bitcoin mining uses a large amount of electricity, which means it not only costs money to buy the equipment you need to mine Bitcoin but it also costs money for the electricity required to run that equipment. It’s estimated that Bitcoin mining will use 0.33% of the world’s energy by 2018 so it could affect your utility bill if you live where electricity is pricey or there isn’t an abundance of reliable cheap electricity like we have here in Virginia.
