Bitcoin and other cryptocurrency have generated a lot of enthusiasm since the start of the 2020 lockdowns. More people than ever are investing in them, as evidenced by Bitcoin’s rising in value by 470% since May 2020. This spike is partly due to new high-profile investors getting into the game and hoping they can cash in. Others are ordinary people eager to protect their savings. But one out of three investors knows very little about Bitcoin. This quick and easy-to-read guide explains some underlying principles behind it.
Bitcoin is a medium of exchange and a store of value, just like fiat currencies like the dollar or pound. A store of value is anything that an individual believes has value, which is commonly represented in a dollar amount. Something’s value can also be indicated by its purchasing power or how much of something it can buy. A medium of exchange is the means by which one purchases any goods or services. If a person buys a car with one Bitcoin, the Bitcoin was the means used to buy the car.
The main difference between Bitcoin and fiat currency is that one can feel paper dollars or pounds. Bitcoins are purely digital, having no physical form. Additionally, it is mined, not printed. Bitcoin mining is when “miners” use special computers with a lot of computing power to verify transactions on a blockchain. When someone successfully validates a transaction, that person receives Bitcoin in exchange for the service. The blockchain is like a ledger, where all transactions are recorded in blocks of the blockchain. Whenever there is a new transaction, an additional block is added to the chain.
Each Bitcoin user is assigned a unique address, and each coin has a specific key. An address is an identifier that serves as a place where coins can be sent. Private keys are forms of cryptography that allow owners to access their coins safely, keeping them safe from online thieves.
Bitcoin is bought and sold on exchanges with fiat or cryptocurrency, but some platforms do not allow fiat to crypto operations. First-time cryptocurrency buyers must find a service that provides fiat to crypto transactions.
Not all exchanges are anonymous, and anonymity is one of the reasons why people use cryptocurrencies. Exchanges like Coinbase and Kraken have KYC and various identification requirements. However, it is possible to find a crypto exchange without ID on Godex.io. Here, users can also enjoy benefits like fixed exchange rates, orders that are processed in 5 to 30 minutes, and access to 201 cryptocurrencies.
Since Bitcoin is a medium of exchange, it can be used in any store where the merchant accepts it. Coins are stored in programs or devices called “wallets” and most, if not every wallet, is connected to a mobile app, debit card, or another payment method.
Vendors that accept Bitcoin have QR codes somewhere in their businesses. To spend coins, point the camera of a smartphone at the code and scan it. The app will send the payment to the merchant. If using a debit card connected to a wallet, swipe the card. The payment will be made automatically.
Bitcoin is not only a medium of exchange, but it can also be a lucrative investment because of its high value. By following a smart strategy and knowing the risks involved, it is possible to be a successful investor.
The first rule of investing in anything is to buy when the price is low and sell when it skyrockets. Do not be afraid to buy Bitcoin at a reduced price because, eventually, it will go up. However, do not hang onto it when the price starts to climb exponentially. Sooner or later, it will drop, and prudent investors should know when to stop.
The best way to know when to enter and leave the market is by reading the news. Publications like Coin Telegraph provide in-depth coverage of events that can cause prices to rise and fall.
Like gold, Bitcoin is highly speculative, and a massive sell-off can crash the market. Wise investors should not put everything they have in Bitcoin. Doing so could mean losing all of one’s assets. Invest in other cryptocurrencies and put money in mutual/hedge funds or real estate that can safeguard your funds.
Bitcoin is a promising investment, but one has to be fully aware of what they are getting into in advance. The first rule of investing is not to tie up money in something one does not understand. However, those who think they can be successful should try. Study the market and get enough knowledge to manage your finances wisely.
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