Introduction
Bitcoin is the most popular cryptocurrency on the market, and its meteoric rise in value has made many investors wonder if it’s a good investment. Bitcoin saw its value increase from under $1,000 at the beginning of 2017 to over $19,000 by December. Once again, we saw a frenzy of price rises in 2021 where Bitcoin saw an ATH (All Time High) of $67,000, up over 1000% from its 2020 lows of $5245. Since then, it has, however, lowered in price – Possibly making for a great investment with lots of future potential!
What is Bitcoin?
Bitcoin is a digital currency. It’s also a cryptocurrency, but don’t let that confuse you — it’s not like other currencies in that it isn’t backed by a central bank or government. Instead, it uses cryptography to secure transactions and control the creation of new units of currency. In other words, Bitcoin has no physical form; it exists only as data on computers around the world (called “nodes“). This means that there are no paper bills or metal coins to be had when investing in Bitcoin; instead, investors buy them directly through online platforms such as Bitinvestor.
You might think this sounds like an awful lot of work just so someone can send me some money online! But if we look at how things work now with traditional financial institutions like banks and credit cards… well… they’re not exactly perfect either! Banks charge fees whenever someone withdraws cash from an ATM machine outside their network; credit card companies impose interest charges if you make late payments or go over your limit — and both options carry risks associated with identity theft due to insecure databases storing sensitive information about millions upon millions of clients’ personal information. Not exactly ideal.
Bitcoin does away with all these hassles while making transactions faster (and cheaper). And because no middleman is required to verify the validity of each transaction, it’s also much harder for hackers to infiltrate the system and steal your money.
Key features and things that make Bitcoin unique
| Feature | Description |
|---|---|
| Decentralized | No central authority controls the transactions, transactions are verified by network participants through consensus. |
| Limited Supply | The maximum number of bitcoins that can exist is 21 million, which limits inflation. |
| Transparency | Transactions are public and can be viewed on the blockchain, allowing for transparency and accountability. |
| Secure | Transactions are secured through cryptography and verified by network participants, making it resistant to fraud and hacking. |
| Fast and Global | Transactions can be made quickly and with low fees, making it suitable for global use. |
Understanding Bitcoin as an Investment
Fixed Supply
Bitcoin has a fixed supply of 21 million. It’s not like gold where the price can fluctuate depending on how much there is in circulation and its rarity which is largely unknown.
What is backing Bitcoin?
Bitcoin is not backed by any commodity like gold or silver (although some people think it should be). This means that if you own 1 BTC, there is no intrinsic value behind it other than what people believe its worth based on market conditions at any given time – like stocks in companies whose stock prices are determined by supply and demand rather than actual profitability of those businesses. Bitcoin isn’t affected by inflation because there will only ever be 21 million Bitcoins created. Bitcoin isn’t affected by interest rates since no one pays interest on their bitcoins; instead, they earn them over time through mining activities. Bitcoin isn’t affected by geopolitical events such as wars or political instability because these things don’t affect computers that run cryptocurrencies like Bitcoin; only human beings use this currency so these kinds of things won’t impact them either — unless someone specifically targets cryptocurrency users with malware attacks etc., but then again this could happen regardless whether some governments decide against legalizing digital currencies.
Regulation
Bitcoin isn’t regulated by one single entity thus making Bitcoin decentralized, contrary to regular currencies like the US Dollar, British Pound, or the Euro. However, governments are looking to regulate the cryptocurrency market in order to keep investors safe. Examples include; The EU has agreed to implement new regulations enforcing increased transaction monitoring by centralized exchanges when dealing with EU customers while most US states have implemented their own regulations on crypto.
Data from Bloomberg Law also shows the massive increase in bills being proposed in the US Senate and House. Here you can see more than a 10-fold increase in bills proposed for digital assets from 2014 vs 2021.
Bitcoin’s Past Performance
Bitcoin’s performance to date
-
- Bitcoin saw its all-time high in 2021 when it was trading at $67,000 after its low of $5445 in 2020, granting investors in the period more than 1000% in profits.
-
- In 2013, Bitcoin was trading at prices as low as $73 which would’ve granted you a 51140.4% return assuming you’d held onto your Bitcoin till now in the span of 9 years. Bitcoin is currently trading at $37,332.27
The price of Bitcoin has had a volatile history and is subject to speculation by investors. However, it’s important to keep in mind that Bitcoin is also a technology that could be used as an alternative form of payment in the future. With an increase of adaption to the technology and Bitcoin, it wouldn’t be unlikely to see its value increase even further.
Bitcoin has also been subject to several hacks and scams, which have caused the price to fall dramatically.
Factors Driving Bitcoin’s Future Potential
Bitcoin is a store of value.
Bitcoin is considered a store of value because it can be used to preserve one’s wealth through time and protect it from inflation. The supply of Bitcoin is limited to 21 million, making it a scarce asset and giving it properties similar to commodities like gold, which have been used as stores of value for thousands of years. Additionally, the decentralized and trustless nature of the Bitcoin network makes it resistant to censorship, fraud and government intervention, giving it additional qualities that make it appealing as a store of value.
Price history
The bitcoin price has been on an upward trajectory since its inception in 2009 and has historically not shown any signs of slowing down. The cryptocurrency market has grown rapidly over the past few years and continues to do so as more people become aware of what it can do for them financially and the use cases Bitcoin brings to the table.
Adaptation of Bitcoin
The adaptation of Bitcoin and newcomers to the crypto sphere is also apparent with an adoption rate growing rapidly by more than 140% year over year in 2021 alone.
And data shows a heavy increase in monthly active addresses on the Bitcoin network and its significant increase throughout the last years.
Bitcoin as a medium of exchange
Bitcoin is a medium of exchange. In addition to being used as an investment vehicle by traders who want exposure without having to hold onto their coins 24/7/365, it also serves as another way for sellers and buyers alike around the world who wish not only transact business electronically but also anonymously–without anyone knowing exactly where those funds came from or went after being sent out into cyberspace via blockchain technology.
Risks and Considerations
It’s also important to recognize that Bitcoin is a very volatile investment. The price of Bitcoin can fluctuate significantly on any given day, and it has experienced significant price swings in the past. For example, in 2013 one bitcoin was worth about $100; by December 2017 that same coin had increased more than 200-fold to over $20,000 (and subsequently crashed down to around $6k). If you’re looking for an investment offering low volatility and steady returns over time — like stocks or bonds — then Bitcoin probably isn’t your best bet.
However, if you’re looking for opportunities with huge potential upside but also a significant risk, then Bitcoin and cryptocurrencies could be exactly what you need!
Conclusion
Bitcoin is a fascinating, complex asset with a lot of potential. It has gone through great ups and downs but has, over time, luckily withstood its headwinds and resulted in a lot of gains for its early investors. It’s highly volatile and risky, so it’s important to understand the pros and cons before investing in bitcoin or any other cryptocurrency.
Test your knowledge
Get started with Bitcoin by using Bitinvestor
We hope you’ve gained a bit more knowledge on Bitcoin from the article above! Once you’re ready and have a cryptocurrency wallet, you can Buy Bitcoin and Sell Bitcoin through Bitinvestor. We offer a variety of payment methods to make it easy, simple and fast to buy Bitcoin.
