What is Bitcoin and how does it work?
The concept of digital money Bitcoin that you use online is not complicated in itself. After all, most of us are close to transferring money from one online bank account to another.
Cryptocurrencies like Bitcoin are digital assets that act like ordinary currencies, but with significant differences. Banks use peer-to-peer payment methods with no deductions for each transaction. There is no physical version of the coin.
Each bitcoin is made using an encrypted code, which is a string of numbers and letters. The same equation used to generate code can “unlock” it (like a virtual key).
Other important points about Bitcoin:
Cryptocurrencies, such as Bitcoin, Ethereum and Cardano, are payment method that uses blockchain technology to send data to cyberspace.
Every bitcoin must be mined
This is limited: only 21 million bitcoins can be mined in total
Cryptocurrencies are “decentralized” which means they are not regulated by financial authorities like the government or the central bank.
Most platforms will allow the purchase of Bitcoin using a credit card (keep in mind that your credit card issuer will probably charge you a fee for doing so).
Why has Bitcoin declined?
In December 2021, the prices of Bitcoin and several other leading cryptocurrencies plummeted, and in 2022, prices were still on the decline.
The Fed’s January meeting to decide on raising interest rates saw crypto declines with other stocks and shares.
As of February 24, the price of Bitcoin is about $ 35,000, according to data from Coinbase *. That’s far from the all-time high of $ 69,000 seen in November.
Recent unrest has caused:
Uncertainty over rising interest rates in the United States and the United Kingdom, the reason for stopping the sale of risky assets
China is making cryptocurrency transactions illegal
Suggestions that Russia could ban cryptocurrency trading and mining, which could lead to lower prices
There are also threats of further regulation for future cryptocurrency investments.
Should I invest in Bitcoin?
Bitcoin is highly volatile. If you are willing to take risks, first make sure you understand what you are investing in and have a crypto investment strategy.
Also make sure that you are not investing simply because you are afraid of losing. Here are some questions you should ask yourself before getting involved:
Do I understand what I’m investing in and how the Bitcoin and Crypto Market works?
Am I happy with the level of risk?
How much is it now compared to a few months ago?
If so, why would I want to buy one because it costs more? Where else in my life would I do that?
Is there any evidence that prices could rise further?
If I bought it now with the intention of selling it at a higher price later, I wonder who would buy it from me at a higher price and why?
If a resource is so great, why was I not interested when it was so cheap?
Did I convince myself that I somehow “know?”
If you do not have the answers to these questions, then investing is probably not a good idea. If you bought Bitcoin, make sure you are not putting the money you need on the line. Read more about cryptocurrency tips (and avoid mistakes).
If you are new to investing and want to know more about general policy and how to get started, check out our guide here.
Things to consider before investing in Bitcoin
like any investment, cryptocurrency risks, and potential rewards. Compared to traditional types of investing, cryptocurrency is particularly risky.
Here are some things to consider before you invest:
We certainly do not recommend investing all your life savings in the cryptocurrency market
It’s good to see it as a bit of a gamble so invest a small amount of your disposable income and be prepared to lose a lot
Don’t invest more than you can afford
If you do not have much money left over at the end of each month, it is best to stay away from crypto and focus on saving instead.
As with traditional assets, it is good to consider cryptocurrency as a long term investment to give you the best chance of making money.
Cryptocurrency is highly volatile, subject to bull runs and market crashes
How To Make More Money By Investing In Bitcoin
Like any investment, monetization depends on the price at which you buy and sell an asset. If you sell when its price is higher than what you bought, you will make money.
If you sell it for less than you buy, you will lose money.
For example, if you initially invested in Bitcoin:
If sold on 2020 and 31 December 2020, you would get 300% profit
If sold on 2018 and 31 December 2018, you would have lost 73%
Bitcoin is very volatile so the strategy is not to panic and crystallize your losses by selling when its price inevitably falls. This is the similar to all investments.
But there are other options:
Buy shares of bitcoin-related companies
You can invest your money in cryptocurrency exchanges or even buy shares in companies that accept Bitcoin as payment.
You can invest in a Bitcoin Exchange Traded Fund ETF. It mimics the value of the digital currency, which allows you to buy funds without having to trade bitcoin.
Invest in blockchain technology companies
You can invest in a blockchain network (a system for recording information about crypto).
Several investment companies are launching bitcoin funds.
It will still be volatile, but it may be easier to sell your investment and get your money back than to invest directly.