Between 2015 and 2017, the price of Bitcoin grew from $250 to $7000. That’s a staggering 2700% return.
And with nearly 40% of Americans open to the idea of using Bitcoin for transactions and purchases, Bitcoin is on the verge of becoming a mainstream payment option.
You may feel that now is the right time to start investing in Bitcoin but have absolutely no idea how it works or what you’d need to do.
So read on as we answer an incredibly common question: how can I invest in Bitcoin?
What is Bitcoin?
Bitcoin is the original cryptocurrency, although it has since sparked a whole host of other cryptocurrencies and blockchain applications.
In essence, it is a currency like dollars or pounds. Payments can be sent between users just like with traditional currencies, but the key difference is that it operates without a central authority, such as a bank. And there is no physical version; despite the name, there are no coins or notes that can be spent.
It was created by a software developer to be an independent form of currency beyond centralized control.
How does Bitcoin work?
The key to all cryptocurrencies is what is known as blockchain.
Put simplistically, blockchain is just a record of a list of transactions. Each time a transaction is made, a new block is added to the chain. The clever part is that this list is visible to everybody so it is impossible to forge.
Blockchain technology was originally just used for cryptocurrency, but it has turned out to be a perfect solution for everything from medical data to food safety technology, such as with SafetyChain.
The good news you don’t need to understand how blockchain works to be able to use Bitcoin.
Should I Invest in Bitcoin?
The huge growth of Bitcoin may make it seem like a no-brainer, but as with every investment, there are risks. What are the pros and cons of investing in Bitcoin?
Most currencies are deeply affected by political instability. Brexit, for example, has had a huge impact on the value of the pound. But as Bitcoin is not linked to any centralized control, the impact is not the same. In fact, political instability can actually help your investment grow compared to other currencies.
The fees involved in traditional investing are usually substantial, but with Bitcoin, you can invest with very little in the way of fees which will help to maximize your profits. It’s also much easier to invest in as there are no real regulations.
And of course, as we have already seen, the potential for growth is huge.
Like all new technology, there is a risk that the growth is, in fact, a bubble which could burst at any time. So be prepared for the worst case of losing the vast majority of your investment.
The rise of cryptocurrencies has also meant that more and more players have entered the market. Bitcoin was the first, but if you look at MySpace and Facebook, being first doesn’t mean you will always be the best.
Bitcoin’s growing popularity may also be an issue. With more and more people investing, the huge growth that has been seen before is unlikely to continue at the same levels.
How Can I Invest in Bitcoin?
There are a number of ways of acquiring Bitcoin that are quite dramatically different. You can invest in them, but you can also earn them.
Mining is the name given to the process of earning Bitcoin through use of your processing power.
Using specialized hardware, you can allow your computer to be used to verify transactions. As a reward for this, and being the first to complete a complex mathematical problem, you are given some of the cryptocurrency.
With more and more people mining, and the equipment required becoming more expensive, the rewards of this method are not as high as they once were.
First of all, you need to set up a Bitcoin wallet. This very similar to an online banking app or website.
Once you have your wallet, buying Bitcoin is fairly simple. Go to any of the cryptocurrency exchanges and you can use your credit card to purchase a whole range of cryptocurrencies.
There are also Bitcoin ATMs in a surprisingly large number of locations if you want to go old school. They allow you to make transactions to and from your wallet.
If this all still seems too complicated for you, there is another way to invest in Bitcoin at a slight distance.
You can choose to invest in a fund that has invested in Bitcoin. Then if the value of Bitcoin rises, so will your investment. This allows you to make a more traditional investment but still benefit from any Bitcoin growth.
The downside is that the fund will want to take their cut of the profits.
How Do I Use My Bitcoin?
It’s actually possible to spend your Bitcoin in a surprising number of places, and that number is growing all the time.
In fact, with a little trickery, you can use your Bitcoin to shop pretty much anywhere. Whilst some online sites will accept Bitcoin directly, some Bitcoin wallets will allow you to exchange your Bitcoin for traditional currency. There are also websites that will let you buy gift cards with Bitcoin, so you can use you Bitcoin indirectly to shop at sites like Amazon.
You can also set up prepaid Visa and Mastercards that you can fill up using your Bitcoin and use to make purchases just like with any traditional debit or credit card.
Still Not Sure About Bitcoin?
How can I invest in Bitcoin? Well, now you know. But you may still have some reservations about whether or not you should.
Our advice is always to keep reading. And that’s what we’re here for. Whether you want more articles on finance and money or are more interested in the technological side of things, we’ve got you covered.
Our site is dedicated to the curious; for those with a thirst for knowledge. So whatever you’re curious about, you should find something right here to satisfy your needs.