The rise of Bitcoin has been one of the most remarkable investment stories of the past decade. If you were an early adopter in the currency, you would have enjoyed a healthy return already. But, what is it, and how can you get involved? In today’s Bitcoin investing guide, we’re going to go through everything you need to know about Bitcoin, and how you can get started.
What is Bitcoin?
Bitcoin is a ‘cryptocurrency’ and is generated by a network of computers all across the world. Users run Bitcoin software that creates – or mines – Bitcoins that can be added to the marketplace. In the early days, it was pretty simple to mine Bitcoins, but as popularity has grown, it is significantly harder. You need a lot of computing power to mine a Bitcoin now, and the processing power needed can be expensive. Unsurprisingly, this has made the practice far more unattractive than it was in the early days.
Trading and buying
However, while Bitcoin mining has become a little passe, trading and investing in Bitcoins is now a lot more relevant. And, with all the complexities of mining taken out of the equation, it is a far easier way of getting involved with the cryptocurrency.
How Bitcoin works
Every person mining Bitcoin has a private key that leads to an address – or a Bitcoin wallet. They can mine, or trade, from that wallet as little or as much as they like. Trades take place by sending money from your wallet to someone else’s. Bitcoins are not a recognized currency, of course. But, many forward-thinking businesses have the ability to take payments with them.
How to get started with trading
If you aren’t going to mine Bitcoins, then you need to buy them. There are plenty of online marketplaces where you can buy and sell Bitcoins, and it is a simple case of using your regular currency to make a payment. There are market exchanges, too. And, of course, wherever there is an investment opportunity, there are exchange brokers. You will pay these brokers a set fee for them to buy and sell your Bitcoin currency.
Other trading services
There are other Bitcoin trading opportunities, too. As we mentioned above, you can send and receive the currency to and from your Bitcoin wallet to someone else’s. But, regarding investment, buying and selling, you should seek out trading tool services. You can use these to monitor prices, buy cheap, and sell on for a profit. Many of these services offer smartphone apps, too, so you can always stay in control of your Bitcoin accounts at all times.
Part of Bitcoin’s success is that it is a world currency. However, because of this, investors should keep a close eye on all exchange rates. A few foreign exchange percentage points, either way, could be the difference between big wins and colossal failures.
Rules and regulations
There are currently no government or banking regulations about Bitcoin, so there are some benefits of using the currency. For example, you won’t encounter any transaction fees because there are not any middlemen that need paying. But, there are also plenty of dangers to watch out for. You will need to be careful about the services you use when trading, buying and selling because there is little protection from any risks. You can’t get insurance, either – so any money you lose is gone, period.
So, how do you keep your Bitcoins safe? You might have heard about a large number of hacking incidents and security breaches that have happened in recent years. People’s wallets have been left empty, and marketplaces can sometimes be awash with fraudsters. To protect yourself in a comprehensive way, you should try and keep your Bitcoins out of your wallet when not in use. You can store them on a USB drive or external hard drive, for example.
Despite a bad press from people who don’t quite understand Bitcoin, there should be a positive future for investors. Some of the stories are understandable, of course. With any new currencies, there are concerns. Look at the Euro for a prime example of how rocky the road can be. And, even the dollar seemed a risky option when it was first spread across all the states. However, Bitcoin – and other cryptocurrencies – could well be part of the financial future. Don’t believe us? The listen to the Government Office for Science, instead. They state Bitcoins could even replace the traditional banking system at some point in the future.
So, for now, there is still a risk involved in Bitcoin. It can be just as volatile as any other market. But, for long-term investment, it could prove highly valuable.