Bitcoin has been growing in popularity over the past few years, and by now, it would be reasonable to label it as having a “household name.” In short, bitcoin is a cryptocurrency, so there are no coins or bills involved. The digital currency operates independently from banks and government, meaning it is significantly less regulated than the U.S. dollar. This can make for extreme fluctuations in price in a short amount of time. In October of 2013, one Bitcoin was worth $167. Five years later, one Bitcoin is worth $6500. With nearly a 4000% return in only five years, there are certainly opportunities for financial gain within the world of Bitcoin, but how would one go about acquiring them?
1. Know the Facts
- Bitcoin’s abbreviation is BTC, and you will often see it labeled as such in the world of cryptocurrency.
- Unlike physical currencies, any fraction of a Bitcoin can be purchased. In other words, you can purchase half a bitcoin for half of the price of a full one, or a tenth of one for a tenth of the price of a full one, etc.
- Keep in mind that Bitcoin is not a stock. When experts of the financial world speak of “investing” in Bitcoin, what they are truly saying is purchasing BTC with the hopes of its exchange to USD rising in value.
- This type of investing is similar to the concept of purchasing gold or silver.
- There is a finite supply of Bitcoin. Twenty-one million exist, and that is all that ever will.
- Cryptocurrency uses blockchain technology. Blockchain is the way that Bitcoin is stored. While the system is complex, it can be simply defined as an open network that ensures security of people’s currency and information.
- The blockchain is available to anyone with an internet connection, and it being hacked would mean that every computer that hosts the chain would need to be hacked at the same time.
- I highly encourage anyone who is interested in purchasing any form of cryptocurrency to research how blockchain works and why so many experts predict it will become a vital part of finances in the future.
- Bitcoin was created in 2009 by someone with the alias of Satoshi Nakamoto.
- No banks are used within Bitcoin
- The number of retailers and shops accepting Bitcoin as payment are increasing. Overstock and Microsoft are a few of the many.
2. What Amount is Right for You?
- Cryptocurrency has the chance to change how we do business in the future, but investing in such potential does not come without risk.
- Mark Cuban, the billionaire entrepreneur, recommends that 10% of people’s personal investments be in the form of cryptocurrency. Following his recommendation, he stated, “If you do that, you have to pretend that you’ve already lost your money.”
- This portion will and should vary from person to person.
- Someone close to, or already past the age of retiring, should be more conservative in their investments. At that age, 10% of assets should not be put into an investment that is subject to such volatility.
- Most likely, anyone younger than forty years old will have more time to recover from possible losses and allow for growth. This makes allotting Cuban’s recommended 10% much more reasonable for someone at that age.
- To aid in determining what amount is right to invest, ask yourself these two key questions:
- Do I have faith in the longevity of Bitcoin and cryptocurrency in general?
- What amount can I comfortably afford to lose?
- This question is often one that can scare potential Bitcoin investors because the idea of losing money in an investment is not a pleasant one. However, it is an important thing to keep in the back of your mind when moving forward and delving into this high-risk, high-reward investment.
3. What is Required to Purchase Bitcoin?
- Internet Access
- An ID
- A Bitcoin wallet (a virtual wallet that stores your cryptocurrency)
- A Bitcoin address (a string of numbers and letters that acts as a personal key that allows you to receive Bitcoin directly into your wallet)
- A debit or credit card to fund the purchase
- Bitcoin exchange (a site that will sell the Bitcoin for USD)
4. What is Coinbase?
- Coinbase is an exchange site that lets consumers purchase BTC in exchange for USD. It is almost unanimously regarded as the simplest way to purchase Bitcoin.
- It comes with a free Bitcoin wallet and address combined, which allows people to purchase their Bitcoin, or the other cryptocurrencies that are offered on the site, quickly.
- Signing up for the site is standard and beginner-oriented.
- All that is required, besides an email address and password, is sending in a photo of your ID to verify your identity. Once verified, you are ready to make your first purchase.
Bitcoin has been growing in popularity since 2009. While many view the currency as a high-risk, high-reward investment opportunity, its true intent was to become a useful currency that is vital within our economy. I believe that until the public sees Bitcoin as what it was intended for, and not an “investment,” its growth is limited. In other words, the cryptocurrency must be used for its true purpose to have long-term and stable value.
This mindset should not be looked at as something that turns potential Bitcoin buyers away, but rather, should highlight an investment opportunity. If Bitcoin becomes a globally used currency, its value is sure to skyrocket. Undoubtedly, there is still uncertainty about the cryptocurrency’s future. If Bitcoin becomes the stable currency it was designed to be, those who were not too fearful to invest could reap rewards beyond our imagination.
About the Author: John Jeffrey has always had a great passion for soccer, and he played from a young age up until his college years. He hung up his cleats to pursue a future in finance because of his interest in the stock market and entrepreneurship. He takes pride in both his conservative ideals when it comes to the economy and his business-oriented mindset.
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