BTC

Factors to Consider Before Investing in Bitcoin

Introduction

Bitcoin is considered as the topmost cryptocurrency by market cap, that offers a peer to peer network where payment can be transacted without the need for banks to approve the transactions. Cryptocurrencies are not the physical currency, but digitally present. Bitcoin uses encryption technology with a string of letters and numbers and is used to develop the code and it can be unlocked using a virtual key. This cryptocurrency can be used for the payment of goods and services that use blockchain technology for securing the transactions. Recently cryptocurrencies are becoming more popular and it has been preferred by the investors for long term investment, even though these currencies are highly volatile.

What Is Bitcoin?

Bitcoin is the decentralized crypto used for buying, selling, and trading cryptos directly without an intermediary like a bank. Every Bitcoin transaction is carried out in a public ledger that anyone can access, which makes the transaction irreversible. Bitcoins are decentralized and not backed by any financial institution or government. Since its inception, bitcoin value has gone up, and it was sold for under $150 a coin. In October 2021, the coin was sold at $62,000; since its supply is limited to 21 million coins, users can expect this coin’s price to increase. 

How Does Bitcoin Work?

Bitcoin is developed using distributed ledger technology called the blockchain. This implies blockchain is linked to data and is made up of smaller units called blocks. The information about every transaction is added to blocks, including total value, date and time, buyer and seller, and a unique identity code for every transaction. Further entries are added in a chronological order that creates a chain of blocks. Blockchain is decentralized by nature, implying that any entity cannot control it. The reason that anybody can use blockchain might sound risky, but that is what makes Bitcoin secure and trustworthy. A majority of Bitcoin holders should verify a transaction block to be added to the blockchain. There are unique codes used for recognizing users’ transactions and wallets.

Things to Consider Before Investing in Bitcoin

Just like any Investments, cryptocurrencies come with potential rewards and risks. Compared with other traditional types of Investments, it is risky to invest in cryptocurrency. Here are a few things the user should consider before investing in Bitcoins.

  • Before investing in cryptos, the user should do their research before proceeding. It is better to take advice or reviews about cryptocurrencies, and later, the user should analyze the risk involved before proceeding with the investing.
  • When it comes to cryptocurrencies, the launch of a cryptocurrency comes with a lot of hype and social media attention. There are extensive campaigns, endorsements that might cause the hype. Just blindly jumping without thinking will be risky.
  • As we all know, Bitcoin is prone to volatility, and the user cannot invest in Bitcoin as an emergency saving. Instead, they should make sure that investing in cryptocurrencies is for the long term.

Is Bitcoin a Good Investment?

  • Bitcoin was developed in 2009, and it is the top-most cryptocurrency by market cap. In 2020 April, the market capitalization of Bitcoin is worth $1.017 billion, and this makes it the topmost currency. This cryptocurrency is highly volatile; the user should understand that they should have a proper investment strategy before investing in cryptocurrencies.
  • Bitcoin, like gold, is compared with scarcity. Compared with other assets, Bitcoin has a limited supply of 21 million, just like gold which has a limited supply. If the demand for Bitcoin increases, the prices will also increase.
  • Over the last five years, according to Bitcoin price forecast, Bitcoin’s price has gone up automatically, and it has come to be known as an inflation hedge. Even though volatility is considered a significant factor, users should be cautious when they are investing in cryptocurrencies.

Final Thoughts

To conclude, we can say that several platforms offer access to buy, sell, and trade cryptocurrencies. The user should find out which one is right for them and decide all the features they require. Bitcoin is a highly speculative asset when compared with stocks. Stocks have been there for many decades, while Bitcoin has been in the market for just a decade. It has proven that it has become one of the top cryptocurrencies quickly. If the stock market crashes, it will soon recover; Bitcoin is not the case; the user should invest that amount of money they can afford to lose.

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About author
Gary Smith is freelance writer having 5 years of experience in writing crypto related articles, news stories and web contents. Basically, he is a computer science graduate. He always stay up-to-date with latest technolgy and crypto trends. He is also strong beliver in cryptocurrencies and blockchain world.
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