Cryptocurrency like Bitcoin; all you want to know

What is a bitcoin? Should I buy cryptocurrency or Is it safe to invest in crypto or digital currency like bitcoin? These simple questions are very important and almost everyone in the world wants to know their answer. Another question that we missed is, whether cryptocurrencies will replace the normal currencies in the future? Let’s try to find out the reality about virtual or digital currencies like bitcoin and see what is the future of a parallel currency like bitcoin?

It is important to note that years after calling Bitcoin ‘rat poison,’ American billionaire Warren Buffett has invested $1 billion in a crypto-friendly bank.

Specifically, Buffett’s Berkshire Hathaway company has bought $1 billion worth of stock in a digital bank that focuses on crypto. Buffett’s company bought $1 billion in shares of Nubank, a digital bank based in Brazil and the largest of its kind in Latin America.

What is Nubank?
In other words, Nubank is different from traditional banks because it relies primarily on digital services, rather than physical locations, and instead focuses primarily on digital services.

Bitcoin’s price fell to $34,000 in February from $69,000 in November. Bitcoin is not only the first cryptocurrency, but it is also the best-known of the more than 5,000 cryptocurrencies existing today.

What is bitcoin and how does it work?
Digital money is a simple concept that you use online. After all, We are familiar with transferring money from one account to another online.

Bitcoin is a decentralized digital currency that can be bought, sold, and exchanged directly, without an intermediary such as a bank. Satoshi Nakamoto, Bitcoin’s creator, originally described bitcoin as “an electronic payment system based on cryptographic proof instead of trust.”

Cryptocurrencies such as Bitcoin are built on a distributed digital ledger known as a blockchain. The blockchain is a linked database made up of blocks that contain information about each and every exchange, including the date and time, total value, buyer and seller, as well as a unique identifying code for each. The entries are arranged chronologically, creating a digital chain.

According to Stacey Harris, a consultant for Pelicoin, a network of cryptocurrency ATMs, once a block is added to the blockchain, it becomes accessible to anyone who wishes to view it.

Cryptocurrencies like bitcoin are digital assets that operate like normal currencies. Peer-to-peer payment methods are used without banks taking a cut of transactions. Digital currency, as we can understand, has no physical versions.

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Salient features of bitcoins:

Cryptocurrencies, like bitcoin, ethereum and cardano, are a form of payment that uses blockchain technology to send data in cyberspace
Each bitcoin must be mined
It is finite: only 21 million bitcoins that can be mined in total
Cryptocurrencies are “decentralised” meaning they are not regulated by a financial authority, like a government or central banks
Most platforms will allow bitcoin purchases using credit cards (bear in mind that your credit card provider will probably charge you a fee to do this)

Should I invest in Bitcoin?

Bitcoins are extremely volatile. Make sure you understand what you are investing in and have a crypto investment strategy before you take the risk.

In December 2021, bitcoin and several other leading cryptocurrencies saw huge drops in price. Prices have been on a downward trajectory throughout 2022.

Consider this before investing in bitcoin

Cryptocurrency has both risks and potential rewards, just like any investment. In comparison to traditional investments, cryptocurrency is more risky.

Don’t invest all your savings in cryptocurrency market.
Never invest more than what you can afford.
You should avoid crypto if you have little money left at the end of each month, and focus on saving your money instead
If you want the best chance of making money with cryptocurrency, it’s best to treat it as a long-term investment.

Can I lose all my money in bitcoin?

Yes, it is very much possible that you lose all your money in bitcoin investment. So, be careful and vigilant. You should remember that crypto is very risky and not like conventional stock market investing.

Bitcoin’s value is solely based on speculation which is quite opposite to company stock, where the price of the stock fluctuates based on the performance of the business.

Three main ways to lose all your money in bitcoin:
When the value plummets, you sell: crypto is volatile and its price is determined by sentiment. Though technically you only lose money if you sell an investment for less than you paid for it. This is called “crystallizing your losses”.

Your memory: experts estimate 20 percent of all cryptocurrency has either been forgotten about or lost with a current value of around $140billion, according to Crypto data firm Chainalysis

Approximately $10million worth of cryptocurrency is stolen every day by hackers and scammers, according to Atlas VPN

How to make money by investing in bitcoin?

Making money depends on the price at which you buy or sell an asset. You will make money if you sell when the price of the item is higher than what you paid for it.

You will lose money if you sell for a lower price than you paid for it.

For example, if you had invested in bitcoin at the start of:

2020 and sold on 31 December 2020, you would have made a 300% profit
2018 and sold on 31 December 2018 and made a loss of 73%

The key to Bitcoin is to not panic and crystallise your losses by selling when its value declines.

How to invest in bitcoin?

Buy shares in bitcoin-related companies

You can invest in cryptocurrency exchanges or even buy shares in companies that accept bitcoin as payment.

Bitcoin ETFs

It is possible to invest in a bitcoin exchange-traded fund ETF. It copies the price of the digital currency, allowing you to buy into the fund without actually having to trade bitcoin.

Invest in blockchain technology companies

Invest in the blockchain network (the system for recording information about cryptocurrencies). The tech platform Solana, for example, claims to be the fastest blockchain in the world.

Bitcoin Funds

A number of investment companies are launching bitcoin funds.

It will still be volatile, but it will be easier to sell your investment and get your money back than if you invested directly.

Additionally, there are funds that have some exposure to bitcoin as well as traditional assets like stocks and bonds.

Bitcoin Options

They give you the right to buy or sell bitcoin at a set price (known as a strike price) before the expiration date.

As opposed to purchasing bitcoins outright, bitcoin options allow you to take a speculative position (up or down) on the future direction of a market price.

If you believe the market price will increase, you would buy a call option:

If your prediction was correct and the market price increased above the strike price of the bitcoin option, you could buy bitcoin at the pre-specified price. Depending on how far the bitcoin price rose past the strike price, you could make a profit.

If your prediction was wrong and bitcoin’s price fell, you could let the option contract expire and only lose the premium you paid to open the trade.

How to buy cryptocurrency?

Choose an exchange

Although you can’t buy bitcoin through your bank or investment firm yet, some organizations are working toward this possibility. To exchange U.S. dollars for Bitcoin or other digital currencies, you will need to use a cryptocurrency trading platform.

You can buy crypto online from hundreds of exchanges, but Coinbase, Gemini, and Kraken are a few of the most popular ones. An exchange is an online platform where you can purchase and sell cryptocurrencies.

Available Coins

There are not all exchanges that offer every single cryptocurrency.

Most crypto exchanges offer popular coins such as Bitcoin (BTC) and Ethereum (ETH), but niche altcoins may only be available on a few exchanges. As experts recommend sticking with these big two cryptos and more mainstream exchanges like Coinbase, this shouldn’t be a problem for most new investors.

Fund Your Account

When you create your account, you may need to provide information like your Social Security number, ID, and your source of income.

With most exchanges, you can connect your bank account or debit card to transfer U.S. dollars into your exchange account. Fees may vary depending on how you fund your account – typically, bank transfers cost less than card options.

Don’t confuse funding your account with purchasing crypto. You should never leave any uninvested money in your account, just as you would with traditional investing. You’ll still need to exchange your dollars for Bitcoin once you fund your account.

Cryptocurrency Wallet

Many exchanges allow you to leave your investment in your account, which is the easiest option for most beginners. If you want to further secure your digital assets, you can store them in a cryptocurrency wallet.

Digital currency is stored in a cryptocurrency wallet. Various types of cryptocurrency wallets are available, and they all offer varying levels of security.