I'm sure by now you have probably heard about, or at least read or seen on the news the increasing attention to bitcoin. Year to date bitcoin has made a return on investment for investors of over 1,775% (as of the time of this writing) for the year of 2017!
We'd all like to take a piece of that massive investment return, but first, what is bitcoin about? It's a smart idea to understand an investment before you begin to jump on the trending bandwagon. If you're reading this you've probably asked yourself or your neighbor a question like:
- What is a bitcoin and how does it work?
- Where is the best place to buy bitcoin?
- How bitcoin investments work
- Is bitcoin a scam?
- Is bitcoin a good/safe investment?
- What are the pro's and con's to bitcoin?
If you've asked anything similar to one of the above questions, you are in the right place. In this article I'm going to explain the in's and outs of bitcoin, and what you ultimately need to know. My goal is to help you determine whether it is a worthwhile investment for you, or if you are best spending your time and money elsewhere.
What is bitcoin and how does it work?
Bitcoin is a type of “cryptocurrency” and intended to be a universal worldwide for of payment. Bitcoin was launched in 2009, and was the very first ever type of cryptocurrency, and is by far the most commonly used.
Back in October 2008, an author who used the name “Satoshi Nakamoto” published the idea of Bitcoin, which was later launched in 2009. The whole idea was to have a worldwide universal form of payment that anyone could use. It would have added measures of security, and would not be regulated by or controlled by any government entity.
To give you an example, think of doing a basic wire transfer at your bank. Most likely your bank will charge you to send the money, and also the receiving bank will have a receiving fee as well. It is not uncommon for a people to be subject to fraud through wire transfers, and they often have high measures of regulation.
Now don't get me wrong, bitcoin wasn't made to be an underground system of payment, but rather a quicker and MORE secure way to pay anyone anywhere in the world instantly. Through a system that creates mathematical codes to provide security, aka cryptography, bitcoin is supposed to be even more secure when transferring money online.
Through cryptography, bitcoin is almost impossible for anyone to spend funds from another individuals account, or to impede any transactions in process. Without going into more detail as it pertains to a bit of a deeper conversation on the topic, cryptography requires each transaction to be verified other users using a unique form of code with open source software.
Long story short….its nearly unbreakable and very secure when transferring. And the cool thing about it is you can do it within minutes from any mobile device to anyone in the world.
OK, so…how is bitcoin valued?
As you may know, the US dollar originally measured its value from the gold standard (not the case anymore obviously, which makes paper money even more questionable in its store of value). But what determines the value of bitcoin? It's quite simple really…the law of supply and demand. Allow me to explain…
When bitcoin was founded, it was created to not issue any more than 21 million coins total. Where, for example, the US Dollar has millions if not billions of dollars printed EVERY DAY!
Let me ask you this…what if there were only 1 million $20 dollar bills in existence today? People would pay big bucks to obtain one due to its rarity right? Just like a Ferrari, some models are only made with 2-3 cars alike in the world! Thus people pay millions of dollars for them. The less the supply, the higher the demand.
But what if we said that anyone who wanted a nice crisp $20 dollar bill could have one? Well, that's reality, and as you can see its not a scarce form of money and will buy at most you and your significant other lunch.
Back to bitcoin. Do you see how having only 21 million coins produced determines the value of the coin?
To go even deeper, the value really is in what it is able to do for the average consumer. Cause yeah there might only be 21 million bitcoin, by why would I want one anyway?
Now days with technology and WiFi 24/7, people want instant access and quick processes. Bitcoin allows this and skips the middle man when transferring money electronically, whether that be domestically or even internationally. Being a product that makes paying and transferring money much more secure, much faster, and in some cases much cheaper, the demand for that is through the roof!
That…combined with the cap of 21 million coins, is what determines what someone is willing to pay to have 1 bitcoin. Make sense?
⇒ What Is Cryptocurrency? – A Guide To Cryptocurrency, Bitcoin & Blockchain Technology ⇐
Where to buy bitcoin and how bitcoin investing works
So, now you get the basic understanding of what bitcoin is, but where do you buy it and how can one profit from it?
The most trusted source on the web today to begin purchasing bitcoin is through a company called Coinbase.com. Coinbase has been around almost as long as bitcoin has, and has by far the largest following and clientele base.
Not only do they understand bitcoin and cryptocurrencies, news tells us that they have even began talking about partnerships with big investment banks such as Fidelity to allow investments in cryptocurrency with your brokerage account.
Coinbase.com has also expanded their investment options with cryptocurrency to not only bitcoin, but also Ethereum and Litecoin (sounds like a video game huh..?). Ethereum and Litecoin are just 2 of the other types of cryptocurrencies inspired by bitcoin, with the supposedly next largest potential.
Along with options to invest in the top 3 cryptocurrencies, you get real time price charts and can see the percent change in the last hour, the last day, week month and year.
Lastly, they have made things as easy as possible allowing anyone to open an account for free and immediately begin transferring money to your Coinbase account using your bank debit card. Transfers are instant, and make it easy to deposit money to Coinbase, and send money back to your bank account very easily.
Before investing or purchasing bitcoin with Coinbase.com, make sure you know and understand the good and bad to it. First off, it is NOT a good idea to put all your eggs in one basket. Bitcoin is still in its early stages and has a very volatile price.
Lastly, if you decide to open a Coinbase.com account for free, BE SURE TO DO SO BY CLICKING ON MY LINK TO COINBASE.COM BECAUSE YOU WILL GET AN IMMEDIATE $10 IN BITCOIN AS SOON AS YOUR ACCOUNT BALANCE REACHES $100! THAT'S AN IMMEDIATE 10% RETURN!
My recommendation is to stash $100 into Coinbase.com and purchase primarily bitcoin, then as money comes in you can look at diversifying into the other two cryptocurrencies offered by Coinbase.com.
(Click here for a more detailed review of Coinbase.com)
What are the pro's and con's to bitcoin?
- Easy and quick transfers to anyone in the world
- Very secure source of currency
- Many large companies such as Amazon are beginning to accept bitcoin as a form of payment
- Many countries have begun to adopt the currency and its benefits
- Many large banks and big investors such as Bill Gates have shown interest and potential in bitcoin
- No paper to keep track of, all electronic and very accessible through any mobile device with internet connection
- Still in its early stage of coming to market
- Has a very volatile price fluctuation (could be temporarily for a few years, or permanent, TBD)
- Not accepted at all retail and online stores
Is bitcoin a scam? Is it a good/bad investment?
When all is said and done, I think after everything we have discussed above, that its safe to say that bitcoin IS NOT a scam.
My opinion, is that its still a new concept and idea, and the lack of knowledge and education by many who are becoming aware of its existence create the idea that it is a scam.
Rest assured, I have put thousands of dollars in to bitcoin (and many other cryptocurrencies as well) and from personal experience assure you it is legit.
As far as an investment vehicle, the closest thing I'd compare bitcoin to is the volatility of penny stocks. Penny stocks are stocks that are valued under $5 per share (usually), and due to their low value their prices swing sometimes up and down in excess of 50%.
Bitcoin is still in its volatile stage and some days have changed in value by as much as 60%+. If you are going to dabble in bitcoin as an investment, be ready to watch the value go up and down. In most recent prices as of this post, the trend is upward with a large price fluctuation.
As mentioned above I have personally invested thousands of dollars in bitcoin and other cryptocurrencies, and just yesterday alone (as of the time of this post), I made over $350 within a few hours. Not bad! But keep in mind it is just as easy to lose $350 just as quick.
If you are going to put money there to invest, my advice is to invest at least $100 with Coinbase.com, and let it sit for at least a couple months. With bitcoin's historic value and upward trend, chances are you will make a good return on your investment.
My ultimate opinion and personal experience with bitcoin
My opinion? Bitcoin (or the idea of cryptocurrency), could easily be the future of international currency. Whether or not that be A) the adoption of cryptocurrency as their main source of currency by many large countries, or B) whether it simply be a new form of currency accepted worldwide and used as a source of currency exchange, I don't know.
But the way I see it, not more then a little over 15 years ago, no one thought the idea of the internet would take the course it has. We now can get access to it virtually anywhere in the world! We can video conference with friends, family and even have business meetings, all of which used to be an idea or dream we all saw in “Back to the Future” parts I & II!
There is no predicting the future, but the way things are going and the way technology is growing, it only makes sense that physical paper currency dies off, and digital currency takes root.
==> Follow this link to claim your immediate $10 in bitcoin at Coinbase.com when your account balance reaches $100 or more!!
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The mystery is solved. I have heard a lot about bitcoin, but not what it really is and how it works. Now I get it. The limited supply makes sense for why it has gone up and up in value. And I get your warning that it is as volatile as penny stocks, something to be cautious about investing in. Thank you for this. I am doing my $100 for the 10% immediate return!
Hi Annie, no problem! Thanks and good luck to you!
I’ve been following bitcoin since it’s launch and I’ve been regretting ever since for not investing in it earlier 😀 Looking at the price right now simply amazes me how far it went from practically nothing. And even though it costs a lot right now, it’s still a good idea to invest, because the price will keep going up and up!
Agreed! Id been contemplating it for a while before I bought in. But its definatley smart to only start with an amount you would be ok loosing (worst case scenario). It is very volatile and you can expect price changes in amounts of 50% up or down so you have to also play the patience game and not worry as prices change throughout the day.