A Small Investment, Big Returns: Bitcoin's $100 Entry Point

Bitcoin is a cryptocurrency that has been on a remarkable trajectory, outpacing other investments. It is a new kind of currency for the digital era, working across international borders without the need for bank or government support. Bitcoin's value has skyrocketed since its launch in 2009, and while it has experienced extreme volatility, it has also delivered substantial returns for long-term investors. With $100, you can enter the world of Bitcoin investing, but it's important to understand the risks and potential rewards before taking the plunge.

Bitcoin's value over time

Bitcoin is a cryptocurrency with a highly volatile trading history. It was introduced in 2009 and had a price of zero at launch. Bitcoin's first significant price increase occurred in October 2010 when its value started moving past $0.10.

In February 2011, Bitcoin's price reached parity with the US dollar for the first time, encouraging new investors to enter the market. Over the next four months, its price in US dollars continued to rise, peaking at over $30. By 2011, it started growing past $1, reaching a peak of $29.60 on 8 June 2011. However, a sharp recession in the cryptocurrency markets followed, and Bitcoin's price dropped to close the year at about $5.

Bitcoin's price continued to fluctuate over the next few years, with strong gains in 2013, when it crossed $1,000 in November and closed the year at $732. Prices slowly climbed through 2016, and in 2017, Bitcoin's price hovered around $1,000 until it broke $2,000 in mid-May and then skyrocketed to close at $19,188 on 16 December 2017.

Bitcoin's price moved sideways in 2018 and 2019, with small bursts of activity. In 2020, the COVID-19 pandemic shutdown and subsequent government policies fed investors' fears about the global economy and accelerated Bitcoin's rise. It closed 2020 at $28,993, increasing 416% from the start of that year.

In 2021, Bitcoin prices reached new all-time highs of over $60,000, and institutional interest propelled its price further upward. It reached a peak of $64,895 on 14 April 2021. However, by the summer of 2021, prices had dropped by 50%, closing at $30,829 on 19 July.

Bitcoin again reached an all-time high of $69,000 on 10 November 2021 before closing at $64,921. In mid-December 2021, Bitcoin fell to a close of $46,211 as uncertainty about inflation and the emergence of a new COVID-19 variant spooked investors.

Between January and May 2022, Bitcoin's price continued to gradually decline, falling further to $29,000 on 11 May. By the end of 2022, Bitcoin dropped below $20,000.

However, fortunes changed for Bitcoin in 2023, which saw a stellar rise in the cryptocurrency's price. It opened 2023 at $16,530 and rose consistently throughout the year, ending at $42,258.

In 2024, the long fight for Bitcoin Spot ETFs came to a close, and some brokerages increased their holdings, while others experienced significant outflows. Bitcoin's price climbed quickly after the fund approvals, and in late February and early March 2024, it once again breached $60,000, setting a high of $75,830 on 14 March—its all-time high price.

As of 21 August 2024, the price of Bitcoin is $59,019.60, with a 24-hour trading volume of $28.81 billion.

Bitcoin's price is renowned for its volatility, but despite this, it has become the top-performing asset of any class over the past decade, climbing a staggering 9,000,000% between 2010 and 2020.

Regarding investing $100 in Bitcoin, it is important to note that this is not a large investment, and investing is challenging. At the $100 level, investing needs to be ultra-cost-effective, and it is essential to avoid fees. While it is possible to invest $100 in Bitcoin, it is a risky and volatile asset, and it is recommended to seek advice from a professional financial advisor before investing.

How to buy Bitcoin

Firstly, it's important to note that investing in Bitcoin is risky. The cryptocurrency market is extremely volatile, and while big names like Bitcoin have appreciated in value over the long term, there are also many stories of people losing money by buying and selling at the wrong time.

If you're looking to invest $100 in Bitcoin, you can buy fractions of a Bitcoin, as you don't have to buy one whole coin.

To buy Bitcoin, you'll need to sign up with a crypto provider or app, such as Coinbase, which is one of the leading exchanges. You'll need to give the app permission to connect to your bank account, and you'll pay a small fee for each transaction. The transaction can also take a significant amount of time—over a week in some cases.

Another option is to use a Bitcoin ATM, which lets you exchange Bitcoin for cash (or vice versa) by scanning a QR code from the digital wallet application on your phone.

If you're new to investing, it's recommended to take a long-term approach and avoid trying to time the market. It's also a good idea to do your due diligence before buying anything.

Bitcoin's viability as a currency

Bitcoin is a cryptocurrency, a virtual currency, that was introduced to the public in 2009. It is the first decentralized cryptocurrency, and its creation is credited to an anonymous developer or group of developers using the name Satoshi Nakamoto. Bitcoin was designed to act as money and a form of payment outside the control of any one person, group, or entity, removing the need for trusted third-party involvement (e.g. a mint or bank) in financial transactions.

Bitcoin has been described as a "techno-anarchist project to create an online version of cash, a way for people to transact without the possibility of interference from malicious governments or banks". It has become a speculative investment, with its value surging and plummeting at various points since its creation. For example, in 2021, the price of one Bitcoin rose to over $60,000, an eightfold increase in 12 months, before halving in value in just a few weeks.

Despite these concerns, Bitcoin has gained widespread adoption, with El Salvador adopting it as legal tender in 2021. It is also accepted as a means of payment for goods and services at many merchants, retailers, and stores, and some governments have even started to acquire Bitcoin. Bitcoin's blockchain technology has been hailed as ingenious and groundbreaking, and it has spurred central banks to consider issuing digital versions of their currencies.

In conclusion, while Bitcoin has some advantages as a currency, such as its decentralized nature and growing acceptance, its volatile value, environmental impact, and lack of true anonymity raise questions about its viability in the long term.

Bitcoin's technology

Yes, you can invest in Bitcoin with $100. In fact, you can invest as little as a few dollars since you don't have to buy one whole Bitcoin. At the time of writing, Bitcoin is valued at around $30,000, but you can buy fractions of a Bitcoin.

Now, onto Bitcoin's technology.

Bitcoin is a digital asset, and like any other asset, its value varies. It is made up of digital code and can be held physically on a hard drive (hardware wallets or cold storage), software-based wallets (hot storage), or kept on digital exchanges such as Coinbase. The value of Bitcoin fluctuates based on market conditions and other factors, similar to stocks or real estate. When demand outpaces supply, the price goes up, and when supply outpaces demand, the price goes down.

Bitcoin is 'mined' by Bitcoin miners who use computers and servers to verify transactions on the Bitcoin network, a shared ledger. Miners solve math equations on this ledger, and when they successfully verify a transaction, they are rewarded with Bitcoin. This process of verifying transactions is called proof of work and is valuable because it protects the network from corruption and verifies the integrity of each transaction.

One key factor in Bitcoin's popularity is its printing cap. No more Bitcoin can be mined after around the year 2140 when the 21st millionth bitcoin is mined. This is in stark contrast to currencies like the US dollar, which can be printed infinitely, making Bitcoin an attractive hedge against inflation.

The technology behind Bitcoin is called blockchain. Blockchain is essentially an anonymous ledger of transactions, and in the case of Bitcoin, these transactions are made using Bitcoin. The ledger is public and lives on everybody's computers, recording all transactions that have ever happened. This makes it impossible to cheat the system because everyone in the system has the same record of transactions.

To illustrate how Bitcoin transactions work, imagine you and I are sitting on a park bench, and I have one apple with me. I give the apple to you. Now, you have one apple, and I have zero. This simple, in-person exchange of a physical object is straightforward to understand and doesn't require a third party to validate it.

Now, let's say I have one digital apple. How do you know that this digital apple that was mine is now yours and only yours? It's more complicated because I could have sent that apple to someone else as well, or made multiple copies of it. This problem, where the same digital asset could be spent more than once, is called the double-spending problem.

Bitcoin's blockchain technology solves the double-spending problem by creating a public ledger that everyone in the system has access to. This ledger records all transactions, so everyone can see that a digital asset has been transferred from one person to another, just like the physical apple on the park bench. This public ledger also ensures that no one can cheat the system by creating more Bitcoins than they actually have, as it would not sync up with everyone else in the system.

Bitcoin's critics

Bitcoin has faced a lot of criticism from finance professionals, economists, and asset managers. Here are some of the key criticisms and concerns surrounding Bitcoin:

No Intrinsic Value:

Critics argue that Bitcoin has no intrinsic value because it is purely digital and backed by nothing. Bitcoin supporters counter that the concept of "intrinsic" value is flawed, and that value is determined by people's demand for and usefulness of an object.

Volatility and Instability:

Bitcoin's volatile nature makes it an unstable medium of exchange. The value of a Bitcoin can fluctuate dramatically, making it unreliable for everyday transactions. However, Bitcoin supporters argue that its volatility is decreasing as it matures.

Energy Consumption:

The Bitcoin mining process has been criticized for its high energy consumption, with some arguing that it is extremely wasteful. Supporters of Bitcoin argue that this energy expenditure is necessary to fairly distribute new Bitcoins, ensure network security, and allow equal participation in the Bitcoin network.

Criminal Activity:

Bitcoin has been associated with criminal activities, including drug dealing and money laundering, due to the anonymity it offers. Critics argue that this makes it a dangerous and unethical investment option. However, Bitcoin supporters point out that the fraction of Bitcoin transactions associated with illicit activity is relatively low, and that traditional banking systems are also used for criminal activities.

Bubble and Wealth Transfer:

Some critics, like Mike Green of Simplify Asset Management, believe that Bitcoin is an "extractive bubble", a mechanism to transfer wealth from one group to another, with no value creation. They argue that Bitcoin's value is based on speculation and that it will eventually collapse.

Government Intervention:

There is a concern that governments will not allow a non-state currency to thrive and will intervene to shut down or heavily regulate Bitcoin. However, Bitcoin supporters argue that its decentralized nature makes it impossible for any single government to fully control or eliminate it.

Not a Viable Currency:

Bitcoin has been criticized for its failure to become a viable, everyday currency due to its volatility, high transaction fees, and slow settlement times. While supporters acknowledge these limitations, they argue that Bitcoin's value lies in its digital nature, programmability, and potential for future innovations.

Centralization in China:

More than half of Bitcoin mining takes place in China, leading to concerns that the Chinese government could seize control of the Bitcoin network. Bitcoin supporters counter that mining pools are dynamic and that the market is shifting towards other locations outside of China.

Despite these criticisms, Bitcoin has gained acceptance from some powerful investors and financial institutions, indicating a growing recognition of its potential as an investment vehicle and a disruptor in the world of finance.

Frequently asked questions