5 Essential Things You Should Know About Bitcoins

Updated on February 10, 2018
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Winfred is a content writer, blogger and entrepreneur. She is also a professional virtual assistant who can help you grow your business.

5 Essential Things You Should Know About Bitcoins

You may have heard of Bitcoin, a term that has become a household in recent years. But have you asked yourself what is a Bitcoin, how to buy Bitcoins or even where Bitcoin trading is conducted? These are some of the questions an intelligent investor should answer before placing their money on this cryptocurrency.

What is Bitcoin?

It is a digital currency that is used to conduct online transactions. You cannot hold Bitcoins with your bare hands the way you do with dollars, pounds or any other physical currency. It is important to note that nobody has control of the Bitcoin. Normally, currencies are controlled by central banks of the country involved. Yet, the Bitcoin is controlled by users around the world. For example, different users select different software to use when trading with the currency. This would not be the case with physical currencies, which are usually standardized.

How Can I Buy Bitcoins?

There are various ways through which one can get this digital currency. These include:

i. Payment for Goods and Services

If you have an e-commerce store, you may get the coins when a customer pays for their goods and services using this cryptocurrency. Note that you have to set up a store that accepts Bitcoins as payment for goods or services.

ii. Local Exchange

You may get Bitcoins from someone within your locality. This takes place in the form of an exchange. For example, you give your friend some dollars, and then the friend transfers some of the coins to your name.

iii. Bitcoin Exchange

You can buy the coin from Bitcoin exchanges. Search for some of the exchanges online and buy the coins from any part of the world. It is much easier to buy from local Bitcoin exchanges.

iv. Mining

You can get Bitcoins through mining. Mining generally involves solving some computational problems and then being rewarded with Bitcoins.

How is Bitcoin Price Determined?

Since this is a currency like any other, its price is measured against the dollar. The same way we can know how many pounds make up a dollar, we can also determine how many Bitcoins make up a dollar and the vice versa. According to Coin desk, one Bitcoin was going for $8,284 as at 9th February 2018. This represented a sharp appreciation from $7,754 the previous day. This is astounding considering that one coin was going for almost $20,000 by the end of December 2017.

What does this mean? It means that the Bitcoin is a very volatile currency. If you are planning to invest your fortune in it, think twice before spending your money. Let’s not overlook the fact that this new currency is very profitable. Considering that it is currently the strongest currency in the world, there is no doubt that you can make a fortune with it. For example, consider a person who bought Bitcoins when one coin was going for $0.5 back in 2009. If the person had bought coins worth only $100, by the end of 2017, that person would be richer by more than $3.8 million assuming that one coin was worth $19,000.

Should I Invest in the Bitcoin?

Well, this depends on the kind of investor that you are and how much money you have. If you have little money, you will definitely invest less than one who has more money no matter what kind of investor you are. If you are a risk taker and you have cash, then you might want to buy some Bitcoins. Should the currency appreciate once more, you might be in the next list of Forbes billionaires. But, if you are risk-averse, you may want to invest in less risky investments such as mutual funds.

Is There a Future for the Bitcoin?

At the moment, it is hard to tell. This is considering the high volatility of the cryptocurrency and the fact that the world has not yet accepted it. For example, in 2017, China banned all trades involving Bitcoin and it more countries adapt to this trend, sooner or later we may be surprised. As an investor, you should know that there are unforeseen circumstances that no one can be able to tell. Furthermore, we all don’t know if we will be breathing tomorrow. So, research and understand the risks that are associated with Bitcoin trading before you jump on the bandwagon no matter how inviting it looks.

References

  1. https://bitcoin.org/en/faq#what-is-bitcoin
  2. https://www.coindesk.com/bitcoin-price-looks-north-as-stock-market-falls-again/

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