Posted in:

Basics of Bitcoin Investment

© by Shutterstock

Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million.

Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Bitcoin can also be held as an investment. Bitcoin has been described as a decentralised, peer-to-peer currency system that is an electronic cash equivalent. Bitcoin Revolution is also sometimes referred to as a cryptocurrency or digital currency.

Define Bitcoin Investment

A Bitcoin investment refers to the channel of investing funds into Bitcoin in order to generate profits from its price fluctuations. Bitcoin Investment is highly volatile with prices reaching more than $19,000 just in December 2017 and then it fell back down to around $10,000 at the beginning of June 2018. Bitcoin investments are not regulated by any financial authority so there is high risk involved in this kind of investment because the value changes frequently.

Bitcoin investment strategies are often done online through Bitcoin trading platforms or Bitcoin CFDs. Bitcoin trading platforms are websites where Bitcoin investors can open a Bitcoin wallet and start buying and selling Bitcoin as an investment. Bitcoin CFDs enable people who want to speculate on Bitcoin’s price to make the trade without physically owning Bitcoins. There are several Bitcoin Investment strategies one can use as a Bitcoin investor, each having its own pros and cons.

Pros of Bitcoin Investment:

– Speculation on rising demand for Bitcoin in emerging markets pushes up prices

– An increase in supply will lead to a decrease in price because there is more supply available

– The digital nature means that it cannot be counterfeited so the value remains high over time

– Divisibility allows any user to buy partial amounts of Bitcoins at a low cost

Cons of Bitcoin Investment:

– Bitcoin is very volatile and therefore Bitcoin investment is risky. Bitcoin’s value can change drastically over a short period of time

– Bitcoin Investment isn’t regulated by any financial authority so it lacks consumer protection; Bitcoin exchanges that operate in the country where Bitcoin is legal may close down at any moment, leaving Bitcoin holders without their assets

– Bitcoin Mining requires special hardware and consumes a lot of power which makes it expensive to do as an individual investor. It involves setting up complex algorithms with solutions distributed through Blockchain technology

 How To Invest In Bitcoins?

There are several ways to invest in Bitcoins all over the world, here we will list two simple and practical methods below: 1) Bitcoin mining: The first method is Bitcoin mining. Bitcoin mining is a process that verifies Bitcoin transactions by solving algorithms with solutions distributed through Blockchain technology where users are rewarded with Bitcoin for their contribution to the processing power of the Bitcoin network. What you need in order to start Bitcoin Mining is special hardware and electricity which makes it very expensive as an individual investor. 

There are Bitcoin mining pools that you can join if you want to start this kind of Bitcoin Investment strategy; but even then, your profits will be very limited due to the high costs involved in the whole process. 2) Buy Bitcoins: The other method is buying Bitcoins directly; where people purchase Bitcoin online or from Bitcoin exchanges all over the world using different kinds of currencies like US Dollar, Euro, Japanese Yen, etc…

Step-by-Step Process

  1. Bitcoin is a cryptocurrency
  2. Bitcoin can be purchased from Bitcoin exchanges, such as Coinbase and Bitfinex
  3. Bitcoin can be stored in Bitcoin wallets, which are digital wallets that store Bitcoin for you
  4. There are several ways to invest in Bitcoin- one way is through mining bitcoins or other cryptocurrencies on your own computer or with the help of an organisation like NiceHash
  5. Another way to invest in Bitcoin is by purchasing shares of companies that mine bitcoins (e.g., HIVE Blockchain Technologies)
  6. The price of bitcoin has been rising steadily over the last few years, so it’s possible there will be another surge soon! What should I do if I want to invest now? Bitcoin has historically been very volatile, Bitcoin is still in development, and Bitcoin is not regulated like other investments. Bitcoin can be used to make purchases anonymously, Bitcoin is not a currency issued by a government, and Bitcoin isn’t guaranteed against the loss of money during a crisis. Bitcoin also doesn’t have FDIC insurance so there’s no guarantee that your bank will refund your Bitcoin if you lose it.