Investing In Bitcoin

“Investing in Bitcoin” is all the rage right now.  Its on the news, its all over the internet, everyone is talking about it, yet very few people really understand it.  I’m here to fix that for you.  In this article you’ll learn what bitcoin is, how to acquire it, how to trade it, and what gives bitcoin value.

What Is Bitcoin

Bitcoin is a decentralized digital currency created in 2009.  Bitcoin was created by a cryptographic expert who went by the pseudonym Satoshi Nakamoto, his true identity remains unknown.

Bitcoins are like cash in that they aren’t tied to your identity.  Transactions made with bitcoin are irreversible and untraceable.  So there kind of like cash, but they also have credit cardesque characteristics in that they aren’t tangible.  They exist only online.  Bitcoins allow you to transfer money online, instantly, for free.  And yes that makes them an excellent form of currency for black market purchases.  

Some people believe bitcoin is a huge step towards a globally connected economy based on a universal currency.  The value of bitcoin is largely determined by the market, whatever someone will take for them is what their worth.

If investing in bitcoin sounds like something you might be interested in than you need to “mine” bitcoin.


How Do I “Mine Bitcoin”

In order to mine bitcoin your computer has to solve a series of complex mathematical equations by running special software.  Once your computer solves one of these complex problems you are rewarded with….bitcoin.

Now, for those of you who aren’t computer whizzes I’ll try not to lose you here.  Some computers are much more powerful than others.  This means the more powerful computers will solve these problems before yours will. Who ever has the most powerful computing machine will be rewarded with the most bitcoin.

Enter bitcoin mining groups.  If your serious about investing in bitcoin your going to want to look into these mining groups.  These groups make it easier to acquire bitcoin because multiple computers are sharing the work load.  The only drawback is that you share the bitcoins generated by your shared computing efforts.

Techcrunch has a step by step guide on how to mine bitcoins.

Do People Really Invest In Bitcoin

The real money investing in bitcoin is made by trading bitcoin as opposed to mining it.

There are some people out there who think investing in bitcoin is an easy path to wealth.  The Winklevoss twins (made famous by “The Social Network”) own 1% of all bitcoins.  If you want to learn more on their stance on bitcoin check out this post; Idiot Dick Facebook Twins Love Bitcoin.  Harsh title huh?

Bitcoin appeals to people who are skeptical of financial institutions and banks like the U.S Federal Reserve.  Investing in bitcoin also appeals to people who are fearful of inflation, and those who are adamant about financial privacy.  If you want to make purchases without any government interference bitcoin is a good place to start.

Yes people are actively investing in bitcoin.  The final outcome of there investment strategies is largely yet to be determined.

Can Investing In Bitcoin Make Me Money

If you want to make money investing in bitcoin you’ll be better off trading bitcoin, not mining bitcoin.  Trading bitcoin is simply buying and selling it via bitcoin exchanges.  If you want to make money buy it for a lesser price than which you sell it for.  Duhhh

All jokes aside I would avoid investing in bitcoin with money you can’t afford to lose.  Bitcoin prices are extremely volatile and are a bubble subject to burst at any moment.  There are folks out there who have bought and sold bitcoin and made impressive profits in very short amounts of time.  There are also people who have lost 50k through bitcoin in no time at all.  In this regard its like any other form of high risk investment.  You can make a lot of money, but you can just as easily lose a lot of money investing in bitcoin.  Because bitcoin is so new; so volatile, and so controversial; theres really no solid investment strategies or guarantees at this point.

If you plan on investing in bitcoin right now; in ten years you’ll either be filthy rich, or lost whatever money you put into it.  Theres really no middle ground.  If you have some spare cash and want a boom or bust investing opportunity than look no further.

What Gives Bitcoin Value?

Bitcoins have value because they are scarce, fungible, easilly transferred, and easily verified, one bitcoin is only as valuable as another bitcoin.  They’ve been trading as high as over $250 dollars per coin and as low as $45.  But how exactly are they valued?  What are they backed by?

They aren’t backed by anything because they are a commodity.  Before you snub your nose at investing in bitcoin because they aren’t backed by anything – ask yourself what gold is backed by.  Gold is backed by nothing.  It has no legitimate value other than the fact that ages ago we decided that it was shiny, we wanted to acquire it, and it was scarce.

 So Why Bitcoin?

Bitcoin is to the inernet as gold is to the earth.  Both require work to mine, both are scarce, and both have a hard limit.  Built into bitcoins brilliant mathematical model is a cap of 21 million potentially mineable bitcoins.

Global commerce is a mouse click away, our economies are more interdependent than ever .  Soon everyone on earth will use the internet every single day for simple tasks.  I wouldn’t bet the house on bitcoin; but I can say with conviction that in my lifetime (I am 22) some form of virtual currency will disrupt our everyday purchasing habits.

As always thanks for reading.  Feel free to drop us a comment or get in touch with us directly.



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