What You Need to Know Before Investing in Bitcoin

Bitcoin has been in the headlines for the last couple of weeks but many people still don’t know about it. Can Bitcoin be the online currency of the future? This is just one of the commonly asked questions surrounding Bitcoin. Checkout What You Need to Know Before Investing in Bitcoin for more info.

How Is Bitcoin Working?

Bitcoin is a form of electronic currency (CryptoCurrency) that came into circulation in 2009 and is autonomous from traditional banking. Bitcoin is considered, according to some of the top online traders, to be the best known digital currency that relies on computer networks to solve complex mathematical problems, in order to verify and document the details of each transaction made.

The Bitcoin exchange rate does not rely on the central bank, and the availability of CryptoCurrency is controlled by no single authority. Nonetheless, the Bitcoin price depends on the level of trust its users have, as the more big companies can embrace Bitcoin as a payment method, the more popular Bitcoin will become.

Advantages and Risks Bitcoin One of Bitcoin’s advantages is its low risk for inflation. Modern currencies are suffering from inflation and tend to lose their buying power every year, while governments continue to use quantitative easing to stimulate the economy.

Bitcoin does not suffer from low inflation, as Bitcoin mining is restricted to only 21 million units. That means the release of new Bitcoins is slowing down and in the next couple of decades the full amount will be mined off. Researchers also estimated a mining of the last Bitcoin by 2050.

Unlike traditional currencies that rely on governments, Bitcoin has low risk of collapse. If currencies crash, that leads in an instant to hyperinflation or the wipeout of one’s savings.

Bitcoin exchange rates are not governed by any government, and are a freely available digital currency.

Bitcoin is easily transportable. One billion dollars can be deposited in the Bitcoin on a memory stick and inserted into one’s pocket. Compared to paper money it’s that easy to transport Bitcoins.

Bitcoin’s untraceable existence is one drawback, as governments and other organisations can not track the source of your funds and can attract some unscrupulous individuals as such.

How to Make Bitcoin Money Unlike other currencies, there are three ways to make Bitcoin money, investing, trading and mining. Bitcoin can be traded on open markets, which means Bitcoin can be bought low and sold high.

Bitcoin volatility The value of Bitcoin has fallen in recent weeks due to the abrupt stoppage of trading in Mt. Gox which is the world’s largest Bitcoin exchange. Trading was stopped due to the malleability-related theft, which was claimed to be worth more than 744,000, according to unverified sources. The incident has impacted investor trust in the virtual currency.

Bitcoin’s exchange rate soared to over $1,100 last December, according to the Bitcoin map. That was when more people became aware of the digital currency, then the Mt. Gox incident happened and it dropped to about $530.

World Experiences Bitcoin More people have accepted Bitcoin’s use and proponents expect customers can one day use the digital currency for their online shopping and other electronic offers. Major companies already used the virtual currency to accept payments. Some of the big companies include among others Fiverr, TigerDirect and Zynga.

Bitcoin’s Future works, but critics have said that due to its volatility, the digital currency isn’t ready to be used by the mainstream. They also point to the past hacking of the Bitcoin exchange which has led to the loss of several million dollars.

Digital currency proponents have said there are newer exchanges that are regulated by financial experts and venture capitalists. Experts added that the virtual currency framework still has hope, and that the expected growth is massive.