Investing in Bitcoin for Dummies: Is it worth it?

Is investing in Bitcoin really worth it?

 

Before answering this question, it’s best to understand first what Bitcoin is and how it works.

 

If you’re new to the world of cryptocurrencies and Bitcoin, this is the perfect read for you.


What is Bitcoin?

Just like any other currency—albeit digital—Bitcoin can be spent, saved, invested, and stolen. Bitcoin’s rise in popularity began back in 2009. It was created by someone under the alias Satoshi Nakamoto.

 

To better understand Bitcoin, let’s first distinguish the difference between cryptocurrencies (digital) and fiat (government-issued) currencies:

 

No central authority
Bitcoin and other cryptocurrencies differ from fiat currencies as they aren’t under traditional banking and financial institutions. Payments can be made without being monitored by a central governing body.

 

How transactions are made
Unlike fiat currencies, all transactions with Bitcoin are made and handled electronically.

 

How Bitcoin is produced
Cryptocurrencies like Bitcoin aren’t printed like fiat currencies. Instead, they are produced by nodes or computers through a process called mining.

 

Now that we have tackled the basics, the best way to know whether or not investing in Bitcoin is right for you is by looking into how Bitcoin investments are made.

 

Ways to Invest in Bitcoin

There are several ways to invest in Bitcoin, and it can get rather confusing to figure out which route is the best one to take.

 

 

HODLing Bitcoin

 

HODLing is essentially buying and holding bitcoin regardless of its current rate.

 

Fun fact: The term HODLing was created in a Bitcoin chat forum by a Bitcoin investor who was monitoring Bitcoin’s price fall attentively but decided to no longer sell. Afterwards, he wrote a post entitled, “I am HODLing”, instead of “HOLDing” in the forum.

 

This typo caught on with the Bitcoin community, becoming an acronym for Hold On for Dear Life.

 

Does HODLing work in terms of investment?

 

When you look at the numbers, you can clearly see the potential in HODLing Bitcoin. Bitcoin’s prices have risen up by 1338% since the first time HODLing was mentioned back in 2013, according to Forbes.

 

Imagine: If a person coin HODLed $10,000 worth of investment back in 2013, they would now have $143,829!

 

Bitcoin Hodlers must invest and handle their stocks wisely. With an asset as volatile as Bitcoin—due to its drastic fluctuating numbers—buying and holding bitcoin is a smart move.

 

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Trading Bitcoin

 

The average value of Bitcoin for the end of August 2019 amounted to 9,487.96 U.S. dollars, according to Statista’s online report.

 

Another way to invest in Bitcoin is by trading—another excellent way to put your money to work. Trading Bitcoin is essentially just like physically exchanging your cash at the money exchange counter.

 

A country’s physical currency is a reflection of its economic and financial status. The U.S dollar, for example, is worth more than that of Thai Baht; therefore, you can buy a lot more Bhat for just a couple of U.S. dollars.

 

The same analogy holds true for Bitcoin, except that its value isn’t based on the industrial economy of a country but from work performed by computers.

 

Bitcoin can be traded like a commodity instead, like gold or even corn.

 

Although it is pretty easy to get into the Bitcoin trade, there’s no guarantee of success as there is no way of telling what Bitcoin’s value is in the distant future—or even tomorrow!

 

The variables that affect Bitcoin’s value are too varied and turbulent. Despite this, the rise in the value of Bitcoin shows a positive trend that you can confidently take in your investments.

 

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Bitcoin Mining

 

Like gold, Bitcoin needs to be mined. Therefore mining is one of the most profitable ways to attain Bitcoin—but only if done on a large scale.

 

Out of the three ways of investing in Bitcoin, mining is the most complicated. And here’s why:

 

The process of Bitcoin mining involves confirming and adding transactions to the bitcoin ledger. This ledger is made up of blocks which consist of multiple transactions.

 

Unlike HODLing and trading, Bitcoin mining requires a bigger production. To mine, you need to acquire expensive equipment, and you need to have computers that can process the computation difficulty required for the tasks at hand.

 

That said, mining isn’t for everyone—only the technologically inclined.


So, is it worth investing in Bitcoin?

If you’re still struggling to understand the value of investing in Bitcoin, think of Bitcoin as gold. In many ways, Bitcoin and gold are pretty similar.

 

Like gold, Bitcoin can’t simply be produced; it has to be mined—digitally. Like gold, Bitcoin has a limited and finite supply—with only 21 million Bitcoins to be mined in total.

 

According to Statista, as of the second quarter of this year (2019), there are 17.8 million Bitcoins in the world. As the number of Bitcoins mined nears 21 million, what will happen once it’s finally tapped out?

 

There is a lot of debate on what’s to happen once Bitcoin reaches its cap. The widespread consensus is that once all 21 million coins are mined, the value of Bitcoin will increase substantially.

 

Such widespread agreement comes from the fact that Bitcoin has a finite supply. When there is nothing left to mine, people will value Bitcoin a whole lot more. Even though this prediction could come true, Cointelegraph believes that the last Bitcoin won’t be mined until the year 2140—121 years from now!

 

While you might not be able to see the day Bitcoin reaches its highest value, its constant rise in value might just be the right investment for you. Just like gold, its finite stock makes it a highly valuable commodity in today’s digital space.

 

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