There is more than one suggested way to invest in bitcoin.
The first commercial use of bitcoin was the purchase of a pizza in 2010 by the well-known programmer Laszlo Haneks for 10 thousand bitcoins, which is equivalent to about 4 billion in today’s valuation, but at that time no one had heard about bitcoin at all.
Now the popularity of investing in bitcoin has grown significantly with the progress of cryptocurrencies, blockchain technology, and the “Metaverse” (metaverse).
The website “Invested Walt” (Invested Wallet) published a detailed report on investing in bitcoin, in which he gave a definition of and advice on investing in bitcoin as the world’s first cryptocurrency.
The author quoted Michael Denny, an investor in the field of cryptocurrencies and head of information at the investment Nerd, as saying that “investing in bitcoin currently is equivalent to investing in the internet in the mid-nineties.” As happened with the internet, investing in bitcoin will take many years to realize its full potential.
Investing in bitcoin has become much easier in the past few years, but there are still some obstacles to overcome, and there is more than one suggested way to invest in bitcoin.
How to invest in bitcoin
Investing in bitcoin can be compared to investing in digital gold.Investing in bitcoin can be done by mining bitcoin using your computing power, buying bitcoin directly through a cryptocurrency exchange, investing in a hedge fund that controls bitcoin, or buying shares in publicly traded companies that use bitcoin and its “blockchain” technology. Each of these methods has different advantages and disadvantages, and the choice between them depends on the goals and ultimate risk tolerance.
Investing in “blockchain” companies
This type of investment does not give you direct ownership of bitcoin, but it allows you to invest in innovative companies that are developing blockchain technologies. One example of this strategy is the Amplify Transformational Data Sharing ETF.
The advantage of this type of investment, as the author says, is the acquisition of shares in companies that were founded to develop Bitcoin and the “blockchain.” Although the stock prices of these companies tend to be linked to bitcoin, this investment is not like holding bitcoin itself.
Invest in exchange-traded funds (ETFs).
Many experts see the introduction of bitcoin ETFs as an important step forward in enabling wider adoption of bitcoin as an investment. Because ETFs are specialized investment tools that track the performance of a particular asset without the investor having to own the asset itself, this eliminates the risk of trouble and security in direct bitcoin ownership and opens the doors for anyone with a brokerage account to invest in bitcoin.
Participate in bitcoin mining
The term bitcoin mining refers to the method of receiving actual bitcoins in exchange for lending your computing power to solve complex computational problems and complete blocks of bitcoin transactions, verified on the “blockchain”، the creation and registration of more coins reduces the reward for solving the subsequent successive block, and increases the difficulty.
Most bitcoin miners have special devices optimized for the mining process, and the cost of these machines can amount to thousands of dollars. Furthermore, these computers consume a large amount of energy, so the cost of electricity should be taken into account when thinking about the preference between mining bitcoin and buying it directly.
Purchase Bitcoins Directly
The last way to invest in bitcoin is to buy the currency directly. If you are new to the field of cryptocurrencies, owning bitcoin is different from owning other assets. Investors can buy bitcoin from a trading platform such as “Coinbase” (Coinbase) and get ownership in a crypto wallet.
There is a high risk from the decentralized nature of cryptocurrencies and the volatility of the Bitcoin price itself. This leads to a second big risk in owning bitcoin directly, which is security.
For example, if you lose your key to your crypto wallet, you have effectively lost your investment with no hope of recovering it.
If you store your bitcoin keys in a wallet controlled by an exchange or connected to the internet (which is known as a “hot wallet”), there is a risk of loss through hacking or theft. Therefore, in order to really protect your bitcoin, most experts advise keeping it in a cool wallet that is offline and less vulnerable to hacking.
Before investing in bitcoin, here’s what you need to know about the world’s first digital currency :
The popularity of the digital currency Bitcoin (bitcoin) has grown significantly since its appearance on the market 11 years ago, and it is currently the most expensive virtual currency.
Expert Juan Pablo Zuluaga, founder of the Institute “mes propias finanthas” for financial education and personal finance, reviews the most important information that you should know before investing in this currency.
What is Bitcoin currency?
According to the bitcoin website, this currency is a consensus network that enables a new payment system and a fully digital currency. It is a decentralized payment method that does not need an intermediary and is based on the technology of computer mathematics.
This virtual currency appeared after the crisis of 2008, and the creator of bitcoin is known by the pseudonym Satoshi Nakamoto.
How it works
At the moment, there are more uses, and they work very well in transactions with large amounts and between countries,” says expert Zuluaga. Bitcoin has great value in the market. At any time, you can exchange bitcoins for dollars and buy what you want later, “he said.
Now there is a wide market in which cryptocurrencies are used, and many companies have already started dealing with bitcoin. For example, you can buy airline tickets, make a hotel reservation, or have dinner at a restaurant and pay in bitcoin.
According to the foundation “Colombia Fintech” (Colombia Fintech), more than 20 companies and institutions in Colombia, for example, accept bitcoin, in areas such as tourism, food preparation, and digital services. The daily turnover is estimated at about 500 thousand dollars.
The volatility of the value of bitcoin
Zuluaga explains that one of the most prominent criticisms of this digital currency and what limits its widespread use is the volatility of its value, and says “it is difficult to set a fixed price for things in bitcoin, but without a doubt, it is already an asset that we can find in many places today.
Do I need thousands of dollars to buy bitcoin?
The expert himself explains that buying bitcoin does not require investing thousands of dollars, as the currency is divided into smaller units known as “satoshi.” A bitcoin can be purchased for 50, 100, or 1000, and you do not need to buy a whole coin for 331 thousand (the value of the coin is dated January 27, 2021).
The importance of learning the principles of investing in bitcoin
According to Zuluaga, there is a lot of information circulating about bitcoin on the internet, but investors in virtual currencies often do not know how this market works and what possibilities they have.
According to him, many invest with an easy profit mentality, and he considers that buying a currency may bring them a double profit after a few months or weeks
Zuluaga believes that there is a wonderful world behind bitcoin, and that this currency may be a milestone between today’s world and the next few years, but only on condition that people learn the principles of investing in this area, and know that the goal of creating virtual currencies is to speculate or make money easily.
The benefits of buying bitcoin
Bitcoin has become a good alternative for investors and part of their portfolios, a negotiable and divisible currency used to conduct international transactions without the need for intermediaries, and has become increasingly attractive in recent years.
Zuluaga believes that bitcoin is a good solution to preserve value in anticipation of high inflation rates of traditional currencies, as “bitcoin is characterized by deflation, which makes it a guarantee of future value.”
Is Bitcoin a safe currency?
Zuluaga believes that “bitcoin is very safe,” but you should know how to use it and how to trade it.
They have tried to hack bitcoin over the 11 years since its creation, trying to copy it more than 6,500 times, but all those attempts were unsuccessful, the spokesman himself says.
And like anything else, you just need to be wary of those who take advantage of the opportunity to cheat, deceive people, and broadcast deceptive hopes of making a quick and easy profit, adds Zuluaga.
It is noteworthy that it has not yet been decided whether bitcoin is a safe currency or a bubble of luck. At a time when the digital currency has witnessed rapid jumps in recent months, boosted by the desire of investors to make a quick profit, history also testifies to its sharp collapse in a number of places.