Whether you know anything about Bitcoin or not, you have probably heard how it has exploded in value recently. It has had a pretty stable value for a while after suffering a steep drop, but it is now climbing to all-time highs.
This valuable cryptocurrency is starting to draw attention as people’s trust in other currencies start to become shaky. With global issues often impacting the financial sector, Bitcoin could be a smart investment if you buy into it now.
How Bitcoin Works
Bitcoin can be kind of confusing for someone new to it. You are, after all, used to having physical money, so the idea of a cryptocurrency may be quite foreign.
Bitcoin is a virtual currency, but that does not mean it does not hold value like any other type of money. Just like any type of currency, Bitcoin is valuable because people believe it is. The value of anything people use as money is only there because someone else is willing to accept it as payment.
Bitcoin is quite different from other currencies, though. It a computer file, and everything about it is virtual. The recordkeeping system that ensures the maintenance of every Bitcoin is the blockchain. It will track all transactions to ensure each person’s balance of the currency is accurate.
The blockchain is also very sophisticated. It keeps the whole system secure. It helps prevent fraud and protects your investment.
It also is anonymous for the most part. Except for the initial identification requirements, nobody knows who you are when you use Bitcoin, and there is no reason for them to know. The blockchain handles all the details for you.
Reasons Bitcoin Value Keeps Increasing
One of the reasons why Bitcoin increased in value initially was because of the backing it had. Many people were willing to dive in and take a chance. With so much investing, the value rose steadily, and people kept assigning value to it as a currency, which only helped it continue to gain.
In the beginning, you could get Bitcoin for very little investment. Since the value rose rather quickly, it meant a very small investment led to a huge payoff. However, when this happened, people did not lose faith in the system. They did not withdraw their money from Bitcoin. They kept investing. This only drove the market more.
CNBC explains that now there has been some time since the initial introduction of the cryptocurrency, there is even more interest in it. The interest is big, too. It’s coming from investors and institutional investors. These people have the money really put into the system.
They may find themselves drawn to this digital currency because of increased support from governments. Governments are backing more risky investments, thus reducing the risk and increasing the confidence of investors. They really have little to lose, especially since Bitcoin has such a strong growth history.
Another aspect that helps strengthen Bitcoin and the confidence in it is halving. To understand halving, you need to understand mining.
Mining is when someone with a supercomputer computes calculations to figure Bitcoin transactions. They work in blocks of information, which require computing large equations and a lot of data. It takes a long time to do, but the payoff is a reward of bitcoins.
The amount the miners receive is a set value. However, regularly, halving occurs, which is where the value miners receive is cut in half. Doing this helps to fight inflation and keep Bitcoin on track. When halving happens, it often drives up the value of the currency.
The reasoning is that when miners receive their bitcoins from completing a block, these are new bitcoins entering the market. As you may know from economics, when you add more currency, it drops the value of all existing currency. So, decreasing how much they receive helps curb the introduction of new bitcoin and allows for a steadiness in the market.
Another aspect to consider about Bitcoin and why its value seems to soar is the lack of government involvement. Bitcoin pretty much operates on its own with little regulation. It does not feel the impact of decisions lawmakers make.
For example, if lawmakers decide to spend more money, it often reduces the value of the currency because it requires making more of it. That doesn’t happen with Bitcoin because regulators do not spend this type of currency, so it does not suffer from government decisions.
Some Vulnerability
This does not mean it is not vulnerable like other currencies. There are still things that could negatively affect it. In fact, in recent years, trends in bitcoin value seem to follow the stock market.
There is also concern that after seeing a lot of growth in a short period of time that it is inevitable there will be a fall. However, predictions are shaky. In the event it does cause a loss of value, there is hope that it won’t go too low.
The lowest value ever for Bitcoin was around $3,000. There are mixed opinions on why that happened. However, the main point to keep in mind is that it rebounded fast. So, even if there is a decrease in value, if you sit tight, it will probably go back up.
How To Get Your Own Piece of the Pie
While the value of bitcoins is currently quite high, if you have the money, you may want to invest. Projections see it rising more in the near future.
To buy bitcoins, you need to start with securing a wallet, which is where you keep your money. This may be virtual or physical, which is like a flash drive. You also need to connect with your financial institution to fund your bitcoins.
Then, you need to find an exchange. An exchange is the only place to buy your bitcoins. You can also use it to trade and sell them. The main job of an exchange, such as NordikCoin, is to exchange your money for bitcoins.
It is important that you make sure you choose a trustworthy exchange, such as one owned by Omni Matrix. Also, once you obtain bitcoins, make sure to transfer them to your wallet for security.
You can also secure bitcoins through sell items and accepting them as currency. However, due to the high current value, you would have to sell something of great value to be able to even accept one bitcoin.
Wrapping Up
If you have never looked into bitcoins before, it may be confusing in the beginning. However, once you start, you will see it isn’t that much different than dealing with your typical currency. Of course, bitcoins do seem to have a value that far exceeds that of most currency, so it is an investment well worth considering.
