Investing in bitcoin

Bitcoin(BTC) is a decentralized, digital currency, and one of the first digital currencies — which was launched in 2009. Investing in bitcoin has been gaining popularity and traction. As of 2022, there have been more than 720 million Bitcoin transactions.

Reasons to invest in bitcoin

There are a few reasons why you might want to invest in Bitcoin, and the most common include:

  1. Volatility: As an investor, you know that high risk can mean a high reward. Bitcoin's volatility (its price going up and down) makes it an attractive investment option.
  2. Privacy: You don't need to provide your personal information when making a transaction using Bitcoin. This is another feature that makes it highly attractive to investors.
  3. Transparency: All transactions are public and can be viewed on the blockchain at any time.

The market capitalization of Bitcoin is $828,665,433,718 USD as of April 2021. The all-time high of Bitcoin was over 65K per coin.

Bitcoin back when

Bitcoin was the hottest investment of 2017. It's a digital currency that was created in 2009 and has been creating buzz since its creation, though it took off in 2017. The reason it had taken off is that in December 2016, Bitcoin reached a former all-time high of $19 500 USD per coin. One of the reasons for this rise is because there’s always more demand than supply, which led to the price rising so quickly. This increase in price indicates that people are still buying up as much as they can and will continue to do so until cryptocurrency becomes mainstream and something that people see a lot less value in.

Buying bitcoin

A user can purchase bitcoins by connecting their bank account to a bitcoin exchange(either centralized or decentralized), Paypal or credit card which then allows them to transfer money into their account and buy bitcoins at the current market rates.

Once you’ve decided to enter the world of bitcoin, it helps to know how and where you can buy some. The easiest way to do so is by connecting your bank account to a bitcoin exchange or broker. You can then transfer money into your account and buy bitcoins at current market rates.

The rate of bitcoin fluctuates heavily and can be affected by commodities such as gold and oil. The purchase price for bitcoins is also determined by supply and demand, which means that it could rise or fall at any time. Currently, there are more than 19 million bitcoins in circulation.

Mining bitcoins or trading them?

Buying Bitcoin is now easier than mining it! In the early days of bitcoin, many users were able to mine thousands of coins using their home computers. These days, mining has become so industrialized that it is virtually impossible for any individual without specialized ASIC hardware (think supercomputers) to compete.

Though there are over 1 000 virtual coins on the market today (and thousands of ICOs that want you to invest in coins), BTC remains the most popular choice with an estimated 10 million users and counting.

Of the many cryptocurrencies on the market, Bitcoin is by far the most popular. It was one of the first to achieve widespread adoption, and it's still the most widely known and used cryptocurrency today.

There are a number of reasons for this, but its monetary value is a major factor. The price of bitcoin has increased dramatically since 2010 (when it was a few cents) and continues to rise steadily. This makes BTC appealing to those looking for investment opportunities.

Crypto terminology explained

ICO: short for “initial coin offering,” this is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO. Next, interested investors buy into the offering, either with fiat currency or with preexisting digital tokens like ether. In exchange for their support, investors receive a new cryptocurrency token specific to the ICO.

Blockchain: An online ledger that records and verifies all transactions related to a given cryptocurrency over time. The information found on each block of a blockchain is verified by many computers around the world (aka "nodes") making it nearly impossible for anyone hacker to override the system's security protocols and steal coins from people's accounts (see also "double-spend").

Block Reward: This is how many new coins are introduced into circulation every time someone creates a new block on the blockchain (see also "mining"). If you're mining Bitcoin and you create a brand new block on its blockchain, your reward will be 12.5 BTC.

Mining: Mining is the process by which a new cryptocurrency is created.

Hash: A hash function takes input data and creates an output using an algorithm. When used in cryptocurrency, it helps to prevent data from being altered, allows miners to validate blocks, and ensures that no one can spend funds that do not belong to them.

Addresses: A string of alphanumeric characters used to send, receive or store cryptocurrency on the network. Think of this as similar to your bank account number. It's also possible to have a public key that anyone can use to send funds to your wallet, and a private key that you can use to withdraw funds from your wallet.

Altcoin: Any digital cryptocurrency other than bitcoin (e.g., litecoin, dogecoin). Most altcoins are forks of bitcoin with small unnoticeable changes made.

ASIC Mining; Application-specific integrated circuit chips (ASIC) are specifically designed to do nothing else but mine, so they can do it much more efficiently than GPU mining

A protocol is a set of rules that determines how cryptocurrency transactions work. Different protocols may call for different types of information to be exchanged during transactions and have different numbers of confirmations before a transaction is considered complete.

A public key is a unique alphanumeric sequence assigned to each cryptocurrency wallet, and it's what you use to receive cryptocurrency. A private key is used in conjunction with a public key to send cryptocurrency from your wallet to another user's wallet.

Traditional brokers vs decentralized exchanges

Decentralized exchanges are not regulated by any single entity. Instead, the exchanges rely on blockchain technology to facilitate trades. Additionally, since decentralized exchanges don't have a single point of failure (the way a centralized exchange does), they can't be shut down.

Transactions are peer-to-peer (p2p), meaning that users interact with each other directly without an intermediary to manage these interactions and take a cut of the transaction. Unlike centralized exchanges, p2p transactions generally provide greater privacy because you're interacting with another person directly instead of going through an intermediary like a bank or credit card company.

Centralized exchanges are also called brokers and include Etoro, IG, and the likes. Not all offer crypto, but the ones that do often hold the asset for you, so you do not need a wallet. Do note, that this comes with drawbacks on when you might be able to buy and sell, what level of taxes you pay and which cryptocurrencies are available to you.

Extreme volatility in BTC

One of the major differences between BTC and traditional currencies is that the supply of BTC is fixed, while the supply of fiat currencies can be adjusted by the central bank at any time. This fixed-rate makes Bitcoin a deflationary currency because its limited supply means that it could potentially become more valuable over time.

In addition to this, bitcoin is decentralized meaning no one entity controls it, like a central bank might control a local currency. Instead, all transactions are recorded on a public ledger called a blockchain. Each transaction is verified through an advanced process known as mining—more on this later—and then stored on the blockchain. This makes bitcoin extremely secure and nearly impossible to counterfeit or use for fraud.

The wild price fluctuations have been driven by many factors including but not limited to:

  1. The rise and fall of other cryptocurrencies (like Ethereum);
  2. Hacking attacks in which large amounts of Bitcoin were stolen;
  3. And news stories (both positive and negative) regarding Bitcoin regulation or potential future attempts at regulation in various countries around the world

Largest cryptocurrencies aside from Bitcoin

According to CoinMarketCap, the top 10 cryptocurrencies by market cap (rounded) are:

  1. Bitcoin (BTC) – $1,000,000,000,000
  2. Etherium (ETH) – $200,000,000,000
  3. Tether – $100,000,000
  4. XRP – $50,000,000
  5. Polkadot (DOT) – $25,500,000
  6. Litecoin (LTC) – $13,500,000
  7. Chainlink (LINK) – $12,500,000
  8. Bitcoin Cash (BCH) – $10,500,000
  9. Cardano (ADA) – $10,200,000
  10. Stellar (XLM) – $9,100,00

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