Today, the buzzing word in the international market is Bitcoin. Ever since it reached its all-time high in 2021, everyone has their eyes fixed on this new investment asset. But what is bitcoin, and why is everyone chasing it? Bitcoin is a decentralized digital currency that enables peer-to-peer transactions. It was created by Satoshi Nakamoto back in 2008, who introduced the world to cryptocurrency.
Unlike traditional transactions, bitcoin is free from the control of governments or banks. Instead, all the transactions are monitored via a blockchain by bitcoin miners. A blockchain contains data of all the bitcoin transactions, and this data is available to users all across the globe, but nobody can manipulate it.
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Why are Bitcoins valuable?
The demand for bitcoins is similar to that of gold. There are only 21 million bitcoins available globally, and no bitcoins can further added. This makes it a scanty asset and drives its demands and price. The algorithm around which bitcoin is built ensures the mining of new bitcoins while simultaneously depleting existing blocks.
When it launched in 2009, Nakamoto released 50 BTC at $0.00. Soon, in July of 2010, each BTC valued at $0.09. BTC equated with the dollar price in February 2011. Twenty years later, each BTC valued at $45,000+ in January 2021, reaching its all-time high of $65,000+ in the same year.
The first transaction of BTC dates back to May 2010, when Florida-based Laszlo Hanyecz bought himself pizza worth $40 using 10,000 BTC from Papa John’s. In 2021, it would’ve amounted to 650 million USD.
Price of cryptocurrencies
The price of Bitcoin is primarily regulated by market demand. If people are willing to buy this cryptocurrency, its demand will naturally go up, and so will the price. The fact that only a limited number of bitcoins are available facilitates its inevitable growth.
Although the current value of BTC is very high, one can still start investing in it with an amount as low as $1. Few apps such as the Cash App, WeBull allows you to start your crypto investment journey with even a dollar.
Legal status
This cryptocurrency is legal in countries like the USA, the UK, India, etc. In countries like China, bitcoin has seen severe backlash. In most countries, people consider it an asset more than currency. One need not provide their Social Security Number for their bitcoin address since it is decentralize. It was one of the reasons why people had qualms about legalizing bitcoin, along with the fact that people were also using bitcoins in the drug market. But in 2013, the FBI had shut them down. Moreover, the Financial Crimes Enforcement Network made it compulsory for bitcoin administrators to register as Money Services businesses to check terrorism and other illegal practices. All these factors helped in legalizing bitcoin.
Although many typically consider bitcoin as a medium of money transaction, it does not enjoy all the benefits of traditional currency. It is not protected under the electronic fund transfer act, which provides security to the user in fraudulent transactions through banks, ATMs, etc. Another major disadvantage of bitcoin is that bitcoin one cannot cancel the transaction.
Why should one buy crypto?
Despite its few shortcomings, bitcoin is seeing a great future in the revenue system on the planet. With passing days, more and more countries are becoming open to adopting crypto and legalizing its usage. In 2014, the FEC (Federal Election Commission) had permitted donations in the form of bitcoin for campaign funds. Recently, the Indian government has also legalized cryptocurrency. Hence, we know for a fact that bitcoin is here to stay, making it a great option to invest in.
If you have been a consistent investor in the stock market, real estate, etc., it would be ideal for you to invest in cryptocurrencies as well. The crypto market indeed experienced a lot of fluctuations, and predicting the trend of crypto would be a futile thing to do. Instead, one can reap great benefits from investing in crypto if they’re aiming for long-term goals and let the magic of compounding work. Since it is a highly volatile market without any involvement of the central agencies, one must keep their portfolio diverse and not dump one’s entire earnings into crypto. Ideally, one can start by allocating 10% of one’s portfolio for risky assets.
How to invest in cryptocurrencies
While investing in cryptocurrencies, one must ensure that they buy it from a legitimate seller. A few platforms where you can buy crypto include Binance.US, Coinbase, Webull, etc. One can also buy bitcoin directly from other bitcoin owners. There exist many bitcoin ATMs in the United States that one can use to buy and sell bitcoin.
After one makes a purchase, many platforms, such as Coinbase, offer a hot wallet to store their bitcoin. In hot wallets, cryptocurrencies will be stored in the cloud, and although the blockchain system of the bitcoin provides higher protection than any other currency, hot wallets can sometimes be a target for hackers. Hence, the better alternative would be to store in cold wallets. Cold wallets are small portable device that allows you to carry crypto around. It costs around $100, but it is much safer.
Conclusion
Many have mixed opinions regarding cryptocurrency among traditional investors. Since it is free of government control, one must be extra cautious while purchasing and storing their bitcoin. If you are a beginner, investing in crypto might not be the best way to start your investment journey since it is a risky process. But once you have invested in a stable portfolio, you can start investing in cryptocurrencies in low amounts and hold it till it compounds. Apart from bitcoin, there exist various other cryptocurrencies that one can consider such as Saitama Inu coin, Shiba Inu coin, etc.
