Who has not heard of bitcoins in today’s day and age? It is one of the most exciting things that one can be a part of at the global level. Individuals who had not stepped into the investing arena are now gaining momentum as they are reading and researching about this exciting new aspect to grow money. With the traction that bitcoins have gained each growing month, it is becoming the fastest growing area of investment as it accounts for more than 46% of the market cap in cryptocurrencies. The value of bitcoins has reached its all-time high and that is still an understatement as it is subject to surge much higher than the current value with market changes.
What is bitcoin? – If the readers are still confused as to what a bitcoin is, this should clear that up. Essentially, bitcoins are digital currencies that can be used to trade and buy goods and services via the internet. There is no authorizing party that holds control of this currency and therefore, the individual trading in bitcoins has full control over the incoming and outgoing value. If one wants to buy bitcoins, they would have to create an account/wallet online and complete the registration. Post that, they can trade bitcoins with a value that they are comfortable in. Once a bitcoin is purchased, the buyer will receive a unique bitcoin address with a private key that will indicate the ownership of a currency for the designated amount. The purchase will be recorded on all the computers using that blockchain worldwide.
4 key takeaways from the journey of bitcoin
The resurgence of BTC into the financial world has taken it by its horns.
- Viewing bitcoin as an asset class – At any given time, a mere 21million bitcoins can be present in the market. This means that the availability of bitcoins is predetermined and limited. Consequently, the ROI of this currency is directly associated with the price of the coin itself which is expressed in the denomination of a country. Since it is yet to become a global currency, the investors can claim their money at a higher level if another investor is prepared to purchase it for that amount. So, to buy or sell this currency in India, converting the rate of bitcoin to INR would be the primary step.
- Its ever-increasing worth – “Things are only as valuable as the worth people attach to them”. Owing to the limitedness of this currency, its demand is increasing. As long as people continue to show their incessant faith in bitcoins and are prepared to pay for it in their currencies, the bitcoin will have value. The hype around bitcoin is international; if people from countries all over the globe are fighting for something, how can the value lessen?
- Bitcoin as a means of payment – Bitcoin transactions happen over a system (blockchain) based on distributed ledger technology (DLT). This technology, at the moment, can handle 1,80,000 transactions in a day. While this may not be much in the current scenario, there is a new technology underway. A so-called lightning network, that is in the experimental stages of development, is said to make bitcoin opaque. The DLT is speedily gaining a tight foothold over the mainstream financial system. Major companies like Tesla and other global institutions are said to accept trading in cryptos – this is another indication of it turning out to be more than a digital currency.
- Disadvantages and risks – While the lack of governing authority is considered good for transparency and decentralization, it can also act as a disadvantage. If anything goes wrong, the investors would have no place to fall back on for assistance. Additionally, the volatility and instability of the market is another disadvantage as people expect to get rich overnight but that is not the case. Blockchains, if hacked, would not be responsible to compensate for damage or losses of their users, unlike banks. Therefore, in cases of wrong payments or hackers, it is usually unfixable. This also holds for forgetting the private key (password) to the specific BTC address. The account and the value would remain inaccessible without the private key.
Since the end of 2013, after bitcoin became a renowned type of digital currency, users have witnessed its value soaring. This does not mean that falls did not happen, market crashes do affect the BTC prices and the value does lower at times – sometimes even drastically. This causes a lot of users to panic buy and sell. Experts, however, advise against this. They ask the investors to keep in mind the fluctuations before investing and conduct a thorough risk assessment preceding any form of monetary transaction.
After Tesla invested in bitcoins, the value surged up to $50,000 which was recorded as an all-time high. The frequent surges have made it an appealing aspect for most new investors and are generating a lot of keen curiosity even among first-time investors. Bitcoin is known as the ‘king of cryptocurrencies’ and therefore, investing in it would be a good idea.