Since the early days of digital trading, Bitcoin exchange and savings appeared to be a useful tool for keeping money in safe currency and making financial transactions online. Bitcoin market is experiencing a steady growth and gaining enormous popularity among buyers and sellers in terms of conducting business activities. What makes bitcoins so attractive? Is it about transparency and fairness, underlying Bitcoin operations? There is definitely more behind it.
Behind the scenes
Unlike other alternative assets bitcoins are not driven by any central authority or the economy of any nation as a whole. They totally rely on a decentralized monetary system and follow the principle of a controlled supply. The currency is issued through the process of mining. Miners track every transaction made with bitcoins and look for blocks in the chain to assign this transaction to. The number of bitcoins that are to be mined is limited to 21 million. Fixed amount makes it easy to monitor, how many bitcoins are there in circulation within a blockchain.
Due to the principle of scarcity bitcoins may hardly be demonetized, in fact they are constantly swinging in value and expected to hit record highs over the years. While gold and oil are losing their value year in and year out, market behaviour of bitcoins has been following an upward trend. Bitcoin price has more than doubled within an annual period only. So, it comes as no surprise that investors consider bitcoins a unique asset to tie up their money in. However, if you want to earn your first million from bitcoin investment, you need to prepare yourself both for risks and rewards.
The choice is yours
More and more people are striving to invest in bitcoins, because this asset-allocation strategy promises to yield high net profit and quickly multiply the amount invested. Actually, if compared to any other alternative, bitcoins have a strong lead in return on investment rates, owing to high volatility and price fluctuations.
Regardless of volatility, which can play a low-down trick on your capital, investing in Bitcoin can still be a good idea. Typically, it comes in several forms.
Investing in Bitcoin mining. Bitcoin mining can be really profitable, but requires great initial capital infusion and high maintenance costs. To undertake bitcoin mining you need to spend a good deal of money on special bitcoin mining hardware and pay a pretty penny for electricity consumption.
The process of bitcoin mining resembles one related to the extraction of commercial minerals. Miners earn coins in return for transaction authorization. They are empowered to solve blocks for each transaction, entering a blockchain, to ensure its validity.
It goes without saying that your hard and patient work will deliver benefits in the form of bitcoins. But how long will it take? And will it cover all your costs? When it comes to bitcoin mining, the game is not always worth the candle.
Investing in Bitcoin-related companies and startups. With many companies embracing the change, Bitcoin ecosystem is expanding day after day. Bitcoins are now accepted as the medium of payment by business giants like Microsoft and Dell, to name but a few. No wonder, venture capitalists want to find themselves in a favourable and profitable position in due time, and thus investing in bitcoin-related projects at the stage of their infancy.
Innovation has always proved to be successful if properly maintained. It is a sure thing that Bitcoin companies have a high growth potential in the market, but they are also subject to failure as much as any other endeavor.
Investing in coins directly. This bitcoin investment method is the most widely used among capitalists. In simple terms, investors hold some amount of bitcoins in virtual funds and wait until their fortune will grow as the result of bitcoin price fluctuations. They then can sell their bitcoins for the most favourable price, and tadah, you welcome yet another millionaire! Seems like speculation? Well, it really is to some extent.
If facing facts, it becomes obvious that bitcoin currency is on the rise now and unlikely to lose ground, but a “better safe than sorry” principle should be also taken into account. When investing in bitcoins directly, you certainly intend to approach bitcoin peak days, but don’t go absolutely risk-blind and leave open the possibility of bitcoin price downpoint as well.
Through thick and thin
Another issue that may arise is whether to go for long-term or short-term investments. Bitcoin is fairly considered to be “digital gold”, because investing in bitcoins can yield immediate returns. Having followed bitcoin growth from genesis to up-to-the-minute status, you may trace positive dynamics from the perspective of value and competitiveness throughout its overall lifecycle.
Let’s take a period of two years and follow the path bitcoins went through. Starting with January 2015 and ending with January 2017, bitcoin price has grown from 200 USD to almost 1000 USD, which is five times higher. It expresses volumes, doesn’t it? Indeed, there were both ups and downs in price rates over the given period of time, but in terms of bitcoin investments the winners are those able to wait and take risks.
Bitcoin is no doubt worth being included in your investment portfolio and can be a wise solution to maximize your returns for a given level of risk. However, comparing bitcoin to other alternative investment assets like gold, oil or real estate, it is not hard to notice one big difference. Bitcoins exist only in virtual environment, they are intangible, they cannot be touched or felt. So, is it possible to accurately evaluate such investment assets and ensure their security? It’s anybody’s guess.
“Your Honour, I object!”
Thus far, there is another obstacle to bitcoin investment progress – state regulation. Kenya is one of the few countries, taking a stand against cryptocurrency and bitcoins in particular. Kenyan authorities, and namely the Central Bank of Kenya, claim that bitcoins threaten economic stability of the state. The Central Bank of Kenya issued a public notice, addressing cryptocurrencies as an immediate risk for sound economic development, because of their unregulated nature and lack of legal redress.
Keep up with the Joneses
Is it the beginning of Bitcoin end? Not a bit of it. Despite all regulatory concerns bitcoin trading is moving into top gear from pole to pole. Some governments don’t stand aside innovation and even consider adoption of bitcoins at a national level. Perhaps, someday we will make use of a universal currency, and that will be Bitcoin. Who knows?
Whether cryptocurrency is a safe bet for investment, that remains to be seen. Nothing ventured, nothing gained! – This is particularly true for bitcoin investments.