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BitcoinMoney

Are bitcoin investments profitable?

Before we begin, let’s start with talking about Bitcoin history, etc.

 

It will be a longer article, but I still hope you will like it as well. Let’s dive inside right now.

 

In this modern-day and age of technology, more and more forms of currency are emerging. A long time ago, most civilizations relied on barter trade, and it was only until many centuries ago that each country started having its own currency. Before the Great Depression, gold was the standard of the value of a certain currency, until it was scrapped upon the fall of the global economy.

 

Nowadays, however, people relied on physical coins and bills. They go to banks to deposit and withdraw money. They invest it in properties and try their best to make them grow. Money makes the world go round, they say. Everything now has a specific price, and the value of a country’s currency relies on its global economic performance. That is why we now have an inflation rate.

 

Still, as mentioned before, we are now living in the era of modern technological times. Trillions and trillions of data and information are being produced and searched all over the world. The basics of computer programming are being taught in schools, and companies place high importance on their employees’ IT and computer knowledge. Because of this, the speed of everyday life is tripled and productivity is higher than ever. The more efficient a company is, the more profit goes into its total revenue.

 

Nowadays, people do not even have to physically go to banks or ATM machines to deposit and withdraw their money. Mobile bank applications started the trend of “virtual” or “digital” wallets. Even Paypal can be considered as a virtual bank! You don’t physically see your money, but you can use it to purchase goods from online sites such as Amazon and eBay.

 

The concept of a “virtual wallet” or a cryptocurrency inspired an unknown group of people under the name Satoshi Nakamoto to create BITCOIN in 2008. Bitcoin is merely one of the many cryptocurrencies increasing right now, but it has been the most popular and valuable ever since its creation.

 

In essence, Bitcoin is some kind of virtual cash that you can use to buy goods and services. Think of it as a form of “token” or “coins” used in arcade games and in the casinos. Of course, you’d eventually have to exchange for a real currency (i.e. US Dollar, Japanese yen, etc).

 

The main downside as of now is that not many shops or online sites accept Bitcoin yet, and it is even banned in some countries. Still, as many notable entrepreneurs and personalities like Elon Musk—co-founder of Paypal and SpaceX, and CEO of Tesla—started to vouch for the sheer potential and credibility of Bitcoin, its value slowly gained traction and experienced an increase in sales.

 

Now, before you get to learn about the exciting part, you need to know the basics of the cryptocurrency first. Below are some of the most frequently asked questions with their corresponding answers:

 

How does Bitcoin work? – As mentioned before, Bitcoin is stored in a digital wallet in a mobile application or an online site. You can conduct transactions by paying with Bitcoin for a good or service or letting others play with it if you are the seller. You can easily send and receive Bitcoin because of its accessibility and scalability. This is the beauty of virtual money.

 

Moreover, every single transaction is recorded in the blockchain, the secured, decentralized technology that manages the transactions simply because it is spread across computers. The main advantage of blockchain is that it ensures unparalleled security. Since it can trace transaction history, it can do three things: 1) prevents people from spending or sending bitcoins they do not possess; 2) makes it impossible for people to duplicate (make copies) of the currency; and 3) records an irreversible timeline of transactions, hence, nobody can undo such transactions. (Note: the safety and security of Bitcoin will be further explained in the next articles more thorough.) Just remember that as long as you have a technological device, you can engage in the wonderful world of Bitcoin.

 

How can I get my hands on some bitcoin? – With this cryptocurrency, you can acquire it by doing one of three things. First, you can purchase bitcoin by using real money. Second, if you are an entrepreneur of some kind, you can accept bitcoin as payment when people buy goods or services from you. Third, you can create bitcoin using a computer (mining).

 

How is new bitcoin created? – A process called mining is done by users, wherein the bitcoin network rewards them for their services, like answering multiple research surveys for example. Of course, this process can be painstaking slow, and not really efficient. Oftentimes, miners get paid for their work as “auditors”, who verify if bitcoin transactions are legitimate or not. This ensures honest and secure transactions in the network.

 

Another thing to note is that miners need to be the first ones to get the right (or closest answer to a numeric problem. Besides verifying transactions, you might have heard that some miners solve some kind of equation, but there’s really no complicated math involved in the process of mining.

 

You just need to be the first miner to come up with a hash, some kind of “code” or a converted input of numbers and letters, for that corresponding blockchain computation. It is a hexadecimal number that works like a solution to the “problem” and is seen as the very backbone of the network. This function serves as the verification of that transaction, which then prevents fraudulent transactions. Keep in mind that the hash is of a fixed length so that hackers won’t be able to crack the code.

 

When you are successful at figuring out the hash, you then verify the transaction, and the block is added to the blockchain. Once you have completed verifying 1 MB (equivalent to 1 block) of bitcoin transactions, you are rewarded with a certain amount of bitcoin.

 

At the end of the day, know that bitcoin mining is different from bitcoin investment. Mining can be very exhausting, time-consuming, and least-rewarding. On the other hand, bitcoin investment is simply just buying bitcoins and waiting for their value to increase so you could sell them for guaranteed profit.

 

This leads us to the main question: are bitcoin investments profitable?

 

One important thing to keep in mind is that bitcoin is a fairly young form of currency and emerging technology. There are a lot of risks as well as there are rewards, especially since the value of bitcoin is not fixed. Then again, bitcoin is just as risky as investing in stocks; you have to look out for trends in the market and constantly make smart decisions.

 

A lot of people have indeed grown rich by investing in bitcoin, but it takes a lot of hard work, time, and effort to do that. It is up to you to decide whether bitcoin investment is worth your time. Are you up for the challenge? For the uncertainties it brings? Do you have a lot of time on your hands?

 

The advantages and disadvantages of investing in bitcoin are enumerated below for easier understanding. First, for the advantages:

 

Accessibility. As mentioned above, you just need a computer or any technological device, and some decent WiFi connection. The fact that it is a cryptocurrency or virtual currency, makes it easy for anyone to start buying or “earning” bitcoin.

 

Liquidity. The great thing about bitcoin is that you don’t have to physically go to banks or ATM machines to cash in or cash out. If anything, you are just a few clicks away from buying or selling bitcoin in case you need some money.

 

Very high returns. Of course, you don’t always get such high returns (just like in stocks), but when you do, it might even be enough for you to retire or send a kid to college. In fact, when Elon Musk started vouching for bitcoin, its value increased from £3,600 to a whopping £27,000 in March 2020. Even the Bank of Singapore claimed that bitcoin could replace gold as its standard for value. “Bitcoin Standard”, anyone?

 

Reliable security. As mentioned, the amazing technology of blockchain can not only make fast transactions but also secure ones. In the last part of this article, you will further understand just how safe the Bitcoin network is.

 

On the other hand, here are its disadvantages:

 

Unregulated by a governing body. One of Bitcoin’s appeals is its decentralization, which means that no government, organization, or state can use, control, or even track your virtual money. The users themselves get to control and enjoy higher interest rates.

 

Non-acceptance of the currency. As of now, Bitcoin has limited practical use. Many countries and stores still do not accept bitcoin as a form of payment. You must always convert it to regular money if you want to buy some goods or services.

 

Unpredictability. Like any stock, the value of bitcoin can drop very quickly and sporadically. This is why you have to be smart regarding when to sell or buy bitcoins.

 

Irreversible transactions. Because the Bitcoin network operates using blockchains, transactions can never be undone and your bitcoin cannot be recovered anymore. You can, however, track where the bitcoin is going.

 

At the end of the day, bitcoin investments are as profitable as any stock in the market. There are many uncertainties on the way, but if you are smart, alert, and careful of each transaction, you may receive unbelievably high returns.

 

It is important to note that, in recent years, many investors have decided that investing in cryptocurrency is a smart decision especially in times of economic uncertainty. Moreover, given that Bitcoin is unregulated by governments or organizations, institution-related economic crises may not affect the value of cryptocurrency. In fact, it may even increase its value.

 

What you also need to understand is, unlike other high-risk investments, bitcoin or any other cryptocurrency is not linked to a real or tangible asset. Everything is virtual. The value of bitcoin is based on its perceived value by the people. As long as many believe in its potential, as well as high-profile entrepreneurs like Elon Musk continuing to vouch for it, the future of Bitcoin is definitely bright.

 

Also, CoinMarketCap, a data, and analytics company for cryptocurrencies has released its statistics regarding the most profitable virtual currency on January 27, 2021. Bitcoin continues to be the highest-grossing cryptocurrency, earning a total of $563.8 billion. It is followed by Ethereum with $142.9 billion and Tether with $25.2 billion. Even so, Bitcoin’s gap with the second highest-grossing currency is still very wide and will continue to be.

Image made with help of rawpixel.com for freepik.com

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