7 Things You Need To Know Before Buying Bitcoin
Over the past few years, Bitcoin has undergone some massive ups and downs. In a lot of cases, Bitcoin was deemed a failure and something that would never gain traction.
But here it is, seven years after it was first launched — Bitcoin is still as popular, with arguably more people buying Bitcoin for various reasons.
Some of them are simply interested in the technology, some buy it as an asset in the hope that it will increase in value, others trade it like a currency.
Whatever the reason, there are a few key things everyone needs to know before they get a taste of their first Bitcoin. Here are 6 things you need to know:
- The price of Bitcoin is based on supply and demand
Unlike money, which is produced by central banks and controlled by governments, no single company or entity controls Bitcoin. Its price is solely based on supply and demand among the market participants that buy and sell Bitcoin. So if you see how the Bitcoin price changes every second, that actually reflects that somebody had just made a buy/sell order in the market.
2. There is only a finite supply of Bitcoin in the world
There’s a finite number of Bitcoin available meant to preserve the value of the currency. The total number of Bitcoin that will ever be available in the world is set to 21 Million. This number is hard-coded into the system and the last Bitcoin is expected to be mined around the year 2120.
In this way Bitcoin is a bit like gold — which is also limited in availability around the world. Gold is a great store of value and that limited availability helps gold preserve its value and Bitcoin follows the same line of thinking.
3. Every transaction is 100% transparent
All Bitcoin transactions are recorded on the public Blockchain ledger right from the very first Bitcoin transaction that was created. The amount of Bitcoin you send and the wallet address (destination) you sent the Bitcoin to, are all recorded and visible on the block chain. However, transactions are only identifiable through private keys and no one can get to know your personal details.
4. You can even buy 0.00000001 Bitcoin
Satoshi, named after Bitcoin founder, is the term for the smallest amount of Bitcoin you can buy. Most people do not buy Bitcoin because they thought you should buy 1 full Bitcoin (which cost you like US$ 600) when you can actually buy US$ 1 worth of Bitcoin!
5. Simple, quick access into and out of Bitcoin
If you want to buy Bitcoin, find a wallet that makes it simple and convenient to buy, sell, and store your Bitcoin. The wallet should have various methods to fund your wallet and withdraw your money with your local currency.
For instance at BitX, we offer a variety of such funding methods including bank transfers, cash deposits at convenience stores such as Alfamart, etc. Withdrawal frequency is also an important key at BitX. We process withdrawals multiple times a day to make sure our customers always have access to their funds.
6. Storing your Bitcoin securely
Security of the Bitcoin wallet you choose should be one of your top priorities. Some Bitcoin wallets get you to store your Bitcoin on your device. But this could be potentially dangerous since if you lose your phone or laptop, your Bitcoin will be lost forever. Hence, choosing a wallet that makes security paramount and implements all the right measures, is really important.
BitX wallets store your Bitcoin using safe, secure practices such as hot & cold storage, multi-factor authentication, and more. The vast majority of customer funds are stored in keys that are kept safe in physical bank vaults inside safety deposit boxes. BitX calls this system “deep freeze” storage solution. Deep-freeze funds are purposely made difficult to access. For day-to-day operations, a small percentage of funds are kept in a combined-strategy system, using offline cold storage/deep freeze and an online hot wallet. Customers get the balance of security and availability at the same time.
7. Invest a bit, but don’t put your life savings into Bitcoin… yet.
“Do not commit all to one boat” — this Latin proverb perfectly captures our suggestion of investing in any form of asset, including Bitcoin. Portfolio diversification is always the best practice for your investment. Bitcoin is considered by many investors as uncorrelated asset class. It provides the perfect option for one to diversify one’s assets. We would recommend owning some Bitcoin purely because it is unlike any other asset you may have and serves as a great hedge against other investment classes and currencies.
So how big will Bitcoin become in the future? Now that’s the 21 million dollar question!