How can bitcoins benefit your investment portfolio?
If you’ve been scouring the internet for the next best investment, you’ve probably come across the topic of bitcoins. Bitcoins are virtual money that can be converted into tangible dollars. Bitcoin technology is about a decade old, but they’ve recently become of greater interest for investors.
What are Bitcoins?
Bitcoins were introduced in 2008 as a peer-to-peer cash system. The idea was to trade coins digitally when purchasing product and services. Using bitcoins eliminates an intermediary, so you don’t need a banking account, PayPal account or any other service that limits your ability to trade money. Because bitcoin trading isn’t regulated, they have a bad reputation of being shady or illegal, but bitcoins are perfectly legal and a legitimate way to pay or receive funds.
Bitcoins are generated by other computers. Users “loan” their systems to the public internet for math calculations. Each time the computer successfully solves a problem, the owner is credited with a specific number of bitcoins.
Your first thought might be that you can generate your own bitcoins, but it takes several high-powered computers to generate one bitcoin, and usually the price you pay for resources and electricity is more than what you would make in bitcoin profit. However, some people do invest in bitcoin generation, which is called “mining.”
Every transaction is logged in a digital ledger called the blockchain. The blockchain is public, so bitcoins aren’t exactly private. Your digital wallet contains your bitcoins, and you publish your public key to allow people the ability to pay you. Each time they pay you, another block is added to the blockchain, and the public can see this information. While your name is not attached to your digital wallet, once you make it public — if people know the name behind the wallet — your transactions are publicly known.
Your wallet is tied to a device, which is usually a desktop, a USB flash drive or a mobile device. The private key you set up gives you access to the wallet, so you can send money to another wallet or cash in your coins for cash.
How Do You Make Money Buying Bitcoins?
You know that you can make money by trading real cash in Forex, but Forex has a huge learning curve and many people lose more than they win. Bitcoins are a bit like trading money in Forex, except you don’t buy and sell other currency. You also don’t need a large amount of cash to get started in bitcoins.
Bitcoins are limited, so the more people who buy them, the more valuable they become as the demand is higher than availability. It’s been said that bitcoins only have a perceived value because they aren’t tangible, but this is untrue.
Several markets have popped up offering bitcoin platforms. These platforms are backed by investors and crowdfunding, and they have turned out to be a billion-dollar industry. Monero, for instance, is a private open-source cryptocurrency that offers you a way to control your digital money with no interference from a third-party.
Monero’s price went from a few dollars in 2016 up to $150 (currently around ~$90) per coin. Obviously, anyone who invested in Monero in 2016 could have a competitive financial portfolio. Investing in bitcoins is the same as any other market — if you find the right investment, it can be well worth the effort.
Some analysts expect the bitcoin market to increase to $300 billion in four years. People who like to take risks and understanding cryptocurrency can improve their portfolio and make more money in bitcoins than in other safer investments.
If you like to follow brands, Hyperledger is an application that helps businesses build blockchain solutions. It’s backed by Cisco, JP Morgan, IBM, Chase, Wells Fargo and Intel. Several banks have backed bitcoin platforms, and Mark Cuban estimated that they will make trillions of dollars in the near future.
The Dark Side of Bitcoins
The unregulated, anarchist-style reputation of bitcoins is what makes many investors hesitant. You can buy and sell bitcoins on Wall Street. You can’t track its ticker or get updates by watching the news. Instead, you must keep track of everything yourself.
The government does not regulate the bitcoin market, so it’s been the target of interest. Your wallet can be hacked along with the platform on which you operate. If the platform is hacked, then you can lose everything you have in your wallet. For that reason, it’s a dangerous place to store your money. At a bank, your account is insured if someone steals your money, but with bitcoins, if your money is stolen, it’s gone for good.
Bitcoins are also used to buy black market products, hence the bad reputation of being the “currency of thieves.” However, many legitimate platforms take bitcoins as a way of payment. Once the sender sends bitcoins to your wallet and the transaction is confirmed, they cannot reverse it. Many vendors and service providers prefer bitcoins, because there is much less risk attached to a payment — no stolen credit cards, no chargebacks, and no disputes.
The other issue with bitcoin is that it’s very volatile. One day, your bitcoin value can be $100 per coin, and the next day it could be $10 (Currently, 1 BTC is around $3500). It’s a significant difference with little input from statistical analysts to give you warnings. It’s estimated that bitcoin value will continue to rise, but it could crash just the same.
Even with its pitfalls, investing in bitcoins can be a valuable addition to your portfolio. You can make millions with bitcoin investments, and it’s not too late to buy into the market. Just make sure that you use a platform that has the best security, and your wallet is safe. Use a USB bitcoin wallet, so that you can carry it with you even if you sell your computer or mobile device.
