Timing is everything when it comes to investing. There are a number of cryptocurrencies out there nowadays, and bitcoin is the most well-known. Bitcoin has the largest market cap of any cryptocurrency by a hefty margin, and it was created in an attempt to try and provide an alternative to the traditional financial system that has been dominated by big banks for decades.
The world relies on the internet more than ever nowadays, so it’s not exactly shocking that a cryptocurrency like bitcoin would successfully gain so much traction. The global currency has garnered interest from investors all over the planet, and the fact that it is open to everyone makes it incredibly unique. Investing in anything could be a bit worrisome at first, but knowing the basics about bitcoin should help you to clear your mind in order to make the right decision.
Should you invest? Here’s a basic beginners guide to bitcoin.
Bitcoins aren’t everywhere, which is obviously essential to their value. The notion of a cryptocurrency can be a lot to think about if you’re delving into unfamiliar territory, but thinking of bitcoin as an asset that can be mined is a smart first step. Take gold, for example. As new gold is unearthed, there will always be less that has yet to be discovered. The increasing scarcity in gold will lead to an increase in its value, which makes it more expensive to find and successfully mine.
Bitcoin can be thought of in the exact same way. There is currently 21 million bitcoin, and the limited supply is in high demand. The sound monetary policy of bitcoin is a major part of what attracts investors, and the fact that it is possible to track the number of bitcoin in circulation and when new bitcoins are being created is important. No bank has the ability to block bitcoins or close your account, and they can be sent to or from anywhere on earth.
As long as you have an internet connection, you have access to your bitcoin. The fact that bitcoin does not have a set price makes it tricky for investors, as well. The price is dependent on what the public is willing to pay. While the price of bitcoin is generally displayed as the cost of a single bitcoin, it is possible to purchase less than a full bitcoin, or you can buy any amount you wish.
Nothing is certain when it comes to the market. Over the course of its brief history, bitcoin has increased in value at an incredibly rapid pace before a steady fall back to a normalized price. Understanding the cryptocurrency’s price history is a window into how it may fare in the future. The fact that bitcoin’s price is unaffected by any single country or government gives it stability, unlike traditional currency. What’s happening in one single country has no impact on bitcoin’s value.
How Do I Get Bitcoins?
While bitcoin is immune to political influence, where you live does matter when it comes to procuring bitcoin. More developed countries have a greater wealth of options and more liquidity than lesser developed nations. Coinbase, which is the world’s largest cryptocurrency broker, operates in the United States, Canada, the United Kingdom as well as the majority of Europe.
Coinbase also allows users to keep track of their own crypto while affording users a place to buy and sell as they wish.
Is it Volatile?
As mentioned, the price of bitcoin generally fluctuates rapidly. There was a major boom in price at the end of 2017 when the price of a single bitcoin exploded to be worth in excess of $18,000. As of this writing, the price of one bitcoin is back down to around $10,000.
The price was pushed back down once established traders with negative views about bitcoin joined the market. Supply and demand is the basis of bitcoin’s price fluctuations. Bitcoin’s supply is pre-programmed. So, unlike in the United States where the Federal Reserve Bank’s monetary policy dictates cash supply, bitcoin tops out at 21 million.
Demand depends on the anticipation that the value will increase, which complicates matters when it comes to bitcoin’s place in the mainstream. As long as bitcoin’s price is completely fueled by speculation, it will struggle to break into the mainstream, as merchants will be reluctant to accept it as a form of payment.
Is it Risky?
Those wanting to invest in bitcoin must know that doing so comes with all sorts of risk. So, if you’re a safe, risk-free type of investor, steering clear of bitcoin is probably smart at this time. If you have some risk tolerance and can take the potential downswings, though, there is plenty of upside when it comes to investing in the world’s most popular cryptocurrency.
If you believe the demand for bitcoin will remain strong, then there is plenty of reason to dive in head-first. The SEC has yet to approve of the effort of some financial firms to start bitcoin exchange-traded funds on the stock market. The SEC is trying to protect potential investors from price manipulation.
Obviously, doing your fair share of research is a must before you dive into bitcoin. Knowing the basics and understanding the risks involved are musts when it comes to getting into the world of crypto. Bitcoin is still relatively new on the scene, so what the future holds at this point is still one big question mark.
Bitcoin does present a new and exciting frontier for potential investors, but going in blindly given all of the potential uncertainty does come with no shortage of risk for those wanting to get in on the action.