Why Bitcoin: Benefits Of Investing In Cryptocurrency

Bitcoin has become a household name, with some of the world's most financially successful people investing in it. But what do you get out of investing in Bitcoin? Bitcoin is a decentralised peer-to-peer network and digital currency, independent of any government or banking authorities. This means that, unlike other currencies, its value is not affected by the challenges that governments face, such as inflation. Bitcoin transactions are also simple, easy, and cheap, and the currency is portable and untraceable. Bitcoin is also highly liquid, with low fees, making it potentially profitable for short-term investments. Finally, Bitcoin is the backbone of almost all other cryptocurrencies, and its growing adoption by businesses and governments makes it an attractive investment for those looking to make huge profits.

Bitcoin's value comes from its finite supply, and it can be used as a store of value and a payment system

Bitcoin is a decentralised form of digital cash that eliminates the need for traditional intermediaries like banks and governments. It was launched in 2009 and is the first and most valuable cryptocurrency. Bitcoin's value comes from its finite supply, and it can be used as a store of value and a payment system.

Bitcoin's finite supply is a key feature that sets it apart from traditional fiat currencies, which can be printed endlessly, and even gold, which can be mined endlessly. There will only ever be 21 million bitcoins in existence, and this finite supply is achieved through a process called "halving". Every four years, the number of bitcoins rewarded to miners for validating transactions is halved, gradually reducing the supply of new bitcoins entering the market. This controlled supply is designed to mimic the rate at which commodities like gold are mined, and it ensures that Bitcoin maintains its value over time.

Bitcoin can be used as a store of value due to its limited supply and increasing adoption. As more people recognise Bitcoin's potential and begin to use it, its value increases. This makes it an attractive investment for those looking to preserve their wealth, especially in times of economic uncertainty or instability in traditional financial systems.

Additionally, Bitcoin can also function as a payment system. While its highly volatile nature has made people hesitant to use it for everyday transactions, it is still possible to send and receive payments in Bitcoin. In fact, some people who invested in Bitcoin early on would frequently use it to make payments and purchases. However, as the value of Bitcoin has skyrocketed, people have become more reluctant to spend it, instead treating it as a store of value.

In conclusion, Bitcoin's value stems from its finite supply, which is controlled through the process of halving, and its utility as a store of value and a payment system. Its limited supply and increasing adoption drive up its value, making it an attractive investment and a viable alternative to traditional currencies and payment systems.

Bitcoin is a decentralised form of digital cash, eliminating the need for intermediaries like banks and governments

Bitcoin was launched in 2009 as the first of a new kind of asset known as cryptocurrency. It is a form of digital currency that uses blockchain technology to support transactions between users on a decentralised network. Bitcoin can be used as a currency or an investment.

Bitcoin's decentralised nature means that it is not controlled by a central entity such as a bank or government. Instead, it is managed by a distributed network of users, with transactions verified through a process known as mining. This makes Bitcoin a peer-to-peer electronic cash system, allowing users to send and receive funds directly without the need for intermediaries.

The benefits of Bitcoin's decentralisation include increased privacy, cost-efficiency, and faster transaction speeds compared to traditional financial systems. It also provides an alternative to centralised currencies, which some investors prefer after the financial crisis and Great Recession. Additionally, Bitcoin has growth potential, as wider trust and more widespread use could lead to an increase in its value.

However, there are also risks associated with Bitcoin's decentralised nature. One concern is the potential for hacking, as there have been several high-profile hacks of cryptocurrency exchanges. Another risk is price volatility, as Bitcoin's value has fluctuated significantly over the years.

Overall, Bitcoin's decentralised structure offers advantages and disadvantages compared to traditional financial systems. It eliminates the need for intermediaries like banks and governments, providing users with increased privacy and control over their funds. However, it also comes with risks and potential drawbacks that investors should carefully consider before investing in Bitcoin.

Bitcoin is a volatile asset, prone to large and fast swings in value, which can result in high returns but also poses tremendous risk

Bitcoin is a highly volatile asset that's prone to large and fast swings in value, which can result in high returns but also poses tremendous risk.

Bitcoin's value has seen wild price swings over its short existence. For example, in May 2016, you could buy 1 BTC for about $500. As of January 2024, a single Bitcoin is hovering around $40,000. That's growth of approximately 7,900%. However, in March 2022, it was as high as $47,454, but by November, it was $15,731.

Bitcoin's all-time high price is $73,794, reached on March 14, 2024. After reaching a high of about $69,000 in November 2021, bitcoin's price crashed in 2022. It then recovered in 2023, seeing a price as high as $31,474 before dropping back below $30,000.

In early 2024, bitcoin's price jumped into the mid $40,000s and by mid-February 2024, after the ETFs were approved, bitcoin's price climbed to more than $50,000.

The price movements of Bitcoin are greatly exaggerated and sometimes are prone to movements of thousands of dollars. Many bitcoin investors tend to "trade the news," as demonstrated by the fluctuations that occur whenever there is a significant news event.

The extreme volatility of Bitcoin makes it a hazardous investment, and it could be challenging to predict when to buy or sell. For example, a coin bought for $200 could wind up having a valuation of just $30.

The high volatility of Bitcoin also makes it challenging to time the market. While it is possible to generate substantial returns by buying low and selling high, it is difficult to find the "right time" to buy or sell.

The tremendous risk associated with investing in Bitcoin means that it should only be a small part of a diversified investment portfolio. Experts generally agree that cryptocurrencies shouldn't make up more than 5% of your portfolio.

Bitcoin is not insured by the Securities Investor Protection Corporation (SIPC) or the Federal Deposit Insurance Corporation (FDIC)

Investing in Bitcoin can be a risky endeavour, and it's important to understand the protections in place for your investments.

Bitcoin and other cryptocurrency investments are not protected by insurance from the Securities Investor Protection Corporation (SIPC). The SIPC is a non-profit corporation created by Congress that has been protecting investors for 50 years. It works to restore investors' cash and securities when their brokerage firm fails financially. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash.

Additionally, Bitcoin is not insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC provides insurance for depositors of banks and other depository institutions in the US. This insurance covers up to $250,000 per account holder per bank in the event of bank failure.

While some cryptocurrency exchanges, such as Coinbase, carry crime insurance to protect against theft and cybersecurity breaches, this does not cover losses resulting from unauthorized access to your account due to a breach of your credentials. It is your responsibility to keep your login credentials secure and use strong passwords.

Therefore, it is important to understand that your Bitcoin investments are not insured or protected by the SIPC or FDIC in the same way that traditional investments or bank deposits may be.

Bitcoin can be bought and sold on crypto exchanges, such as Coinbase and Binance

Buying Bitcoin on Coinbase:

• Sign up for an account on Coinbase and complete the necessary verification steps.
• Connect a payment method, such as a bank account or a debit/credit card.
• Place a buy order for Bitcoin by entering the amount you want to purchase.
• Store your Bitcoin securely, either in a hot wallet (online) or a cold wallet (offline).

Selling Bitcoin on Coinbase:

• Sign in to your Coinbase account.
• Select "Sell" and choose Bitcoin as the asset you want to sell.
• Set the amount of Bitcoin you want to sell and review the sale details.
• Complete the sale by selecting "Sell now."
• Cash out your funds by transferring them to your bank account or leaving them in your Coinbase cash balance for future crypto purchases.

Buying Bitcoin on Binance:

• Sign up for an account on Binance and complete any required verification steps.
• Deposit funds into your Binance account using a supported payment method.
• Navigate to the "Buy Crypto" section and select Bitcoin as the cryptocurrency you want to purchase.
• Enter the amount of Bitcoin you want to buy and confirm the purchase.

Selling Bitcoin on Binance:

• Go to the Binance homepage and click on "Buy Crypto," then select "P2P Trading."
• Choose the "Sell" option and set the cryptocurrency and fiat currency you want to trade.
• Find a buyer that matches your preferences for price, payment method, etc.
• Specify the amount of Bitcoin you want to sell and confirm the transaction.
• Once the buyer has paid, confirm the release of the Bitcoin.

It is important to note that when buying or selling Bitcoin, users should be aware of any transaction fees, security measures, and withdrawal limits that may apply on these exchanges. Additionally, it is recommended to have a basic understanding of Bitcoin wallets, such as hot wallets (online) and cold wallets (offline), to ensure the secure storage of your cryptocurrency.

Frequently asked questions