Bitcoin and other cryptocurrencies have come onto the scene in full force in recent years. There is a tremendous amount of hype and market craze around the idea of cryptocurrencies, with some investors praising crypto as the future of currency, and others deriding it as a useless short-term fad. So which is it, and why should you care?
Rather than attempting to provide specific advice as to whether or not you should invest in bitcoin, in this article, we will explore the basics of bitcoin, how to buy it, why it should be taken seriously, and how to protect and secure your bitcoin investments. This information can hopefully help to answer some of your lingering questions about bitcoin and cryptocurrency so that you are in a better position to make your own informed decisions about this topic.
Before we dive into this topic, let’s get some basics out of the way first. Bitcoin with a capital “B” refers to Bitcoin, the network, or the payment system. On the other hand, bitcoin with a lowercase “b” refers to bitcoin as a currency or currency unit.
Why is Bitcoin So Popular?
Every day, the world grows a little more dependent upon and integrated with the internet. Most financial transactions today happen over the internet at the speed of light. Yet the currencies used in these transactions are typically based on outdated currency models that derive their value from old rocks pulled out of the ground (gold, silver, and precious metals). In the physical world, these currencies are represented by dirty paper carried around in people’s pockets. When you think about it, none of this makes any sense in the connected technology-driven world of the 21st century and beyond. Bitcoin is a secure, global digital currency that is built from the ground up for today’s connected digital reality.
What Makes Bitcoin Different?
To understand the value of bitcoin, let’s look at the way traditional currencies are valued. Gold, and other currencies which derive their value from it, is a limited resource. There is a fixed amount of gold on this planet, and as more of it is mined, it becomes scarce. Furthermore, the rarer gold becomes, the more expensive and time-consuming it becomes to mine it. Eventually, the global supply of new gold will run out, and we will be stuck redistributing the existing supply.
Bitcoin works on a similar principle but updated for the modern world. There is a fixed total of 21 million bitcoins that can ever be in existence. Computers mine those bitcoins, and as they are mined, they become both scarce and more expensive to locate and mine.
What Makes Bitcoin Useful?
Bitcoin is not only scarce, but it is also useful. Bitcoin provides a stable and predictable monetary policy that is easily verifiable by anyone who wishes to do so. This monetary policy is one of the best and most valued features of bitcoin. You can see how many bitcoins are currently in existence, and how many of them have been mined and are in circulation today.
Bitcoin has some of the advantages of cash combined with more benefits than digital representations of traditional currencies. Bitcoins can be sent from anyone, anywhere in the world, to anyone else, anywhere else in the world. They do not rely on banks to assist in these transactions or hold the currency. These transactions cannot be censored or blocked by governments or banks. They can quickly be sent across borders, without the need for any currency conversion.
Bitcoin Democratizes Currency
Due to this independence and freedom, no bank can close your account or deny your transactions. If your nation’s government fails and its currency collapses, your bitcoin balance and transactions can remain safely unaffected.
The internet democratized information, making it easy and instantaneous for anyone anywhere to transmit information to or across the whole world. Bitcoin does that same thing for currency. A stable, global currency that exists outside the clutches of banks, governments, or physical space can have as much of an impact on finance and trade as the internet had on information and communication. Once you understand these critical benefits of bitcoin, you easily can see why using bitcoin as a currency makes sense, regardless of whether you want to use it as an investment or not.
Bitcoin’s Price is Market-Driven
There is no fixed price for bitcoin set in stone. Instead, bitcoin fluctuates in price relative to what people in the market are willing to pay for it.
The price of bitcoin is usually presented as the price of one whole bitcoin. That price has been in the 3-4-thousand-dollar range recently as of this writing, for example. It has climbed dramatically in value over the past few years. You do not need to buy one whole bitcoin. Instead, as with other currencies, you can buy whatever fraction of an entire bitcoin that you need.
Is There a Best Time to Buy Bitcoin?
It is impossible to give any specific advice as to when the best time is to buy bitcoin. As with other aspects of the financial market, it is in a state of constant fluctuation. Throughout the history of bitcoin, it has dramatically increased in value over time, with this growth punctuated by gradual declines as the market stabilizes after a surge in value. The price fluctuates daily, with crests and troughs just like most currencies and other financial instruments.
Because bitcoin is independent of any one nation’s currency or economy, it is not affected by the sorts of things that plague most national or regional currencies. It can, however, be affected by shifts in supply and demand. For example, when fears about the Chinese Yuan currency spiked, this drove up demand for bitcoin, which in turn increased its value rapidly. When global markets are in chaos or fear, bitcoin tends to surge in value as people buy into a more stable currency that is not tied to their national economies.
Bitcoins Must Be Stored Securely
As with any valuable currency, bitcoins must be stored securely to keep them from hackers and thieves. Bitcoins are stored in wallets, which are software or hardware that keeps their data secure. For example, TREZOR is a hardware wallet that is designed to keep bitcoins safe and allows them to be used offline. Ledger is another hardware wallet company, which makes a competing product called the Nano S. If you use a hardware wallet, you should keep it in a secure location under your control and treat it as you would cash or other physical valuables.
Bitcoin is still relatively new, and it will evolve and grow over time as more people learn about it and begin to use it. It has already reached widespread international adoption, with large companies and operations being devoted to its exchange, mining, and storage. It will be years before we begin to fully understand bitcoin’s effect on the world and its long-term value, but for now, it appears to be useful and here to stay.
The above information should not be taken as investment advice. It is for general knowledge purposes only. You should do your research before buying any bitcoins.