The cryptocurrency market has experienced tremendous growth over the last decade; especially in the case of Bitcoin as opposed to other altcoins; Bitcoin is a digital currency that came into the market early in the year 2009.
What is Bitcoin?
Bitcoin’s operations are purely decentralized with no entity given the responsibility of controlling it. Apart from Bitcoin, there are several other cryptocurrencies available in the market today; the most common ones include Ethereum, Litecoin, Tether, Stellar or BitcoinCash.
Since December 2017, Bitcoin’s value has escalated up to about $1900. However, its value has experienced volatility since then, despite the prediction of digital analysts of financial showing the value will increase to $50000 by 2025. This looks quite confusing whether to or not to invest in Bitcoin? Before making a judgment let’s check over some fundamental aspects of in relation Bitcoin investment;
Is Bitcoin Safe?
There has been a hot debate over the years whether Bitcoin is a safe investment. Regardless of the negative stories on bitcoins that people hear, Bitcoin has proven to be more secure compared to other financial systems.
Firstly, the Bitcoin’s operations are decentralized such that over ten thousand nodes are responsible for keeping track of Bitcoin ledger and validate all the transactions in the network to ensure the security of investor’s money. On the other hand, the centralized system can be easily compromised by hackers or third party. Also, Bitcoin uses proof of work to enhance security and prevent any possible failures in the system.
Moreover, the transparent transaction done using bitcoin is also an indication of its safety. Additionally, a customer does not need to provide confidential information when using the Bitcoin Wallet and thus are not a risk of revealing their identity to possible malicious people.
Is Bitcoin Legal?
The question of the legality of any currency is understandable. Unlike the traditional currencies controlled by a single entity, in most cases the central bank, Bitcoin is unique. The Bitcoin is decentralized and primarily under nobody’s control. Generally, the legality of the Bitcoin currency entirely depends on what are you doing with it, where are you in the world. Nevertheless, is essential to be always updated on the recent regulations that may arise with regards to digital currency.
An Investment or a Currency?
Currency can be defined as a unit of account and store of value or a medium of exchange. On the other hand, Bitcoin as per definition can be termed as an asset. In this case, an asset can be used to serve various purposes. A currency should be trustworthy, convenient and stable. Bitcoin has experienced volatility and fluctuation in value over a long period. Its instability, therefore, cannot qualify it as a currency but rather an asset or a commodity. The value of commodity usually surges. It creates an exchange value that is affected and modified by underlying marketing expectations.
How do I value Bitcoin?
There are several ways of valuing cryptocurrencies. One of the best methods of determining the value is by evaluating the market that the cryptocurrency trades in. In this case, the value of Bitcoin can be determined by assessing the supply and demand in the market. In other words, the price of Bitcoin depends on the interaction between the sellers and buyers. A Bitcoin trader who believes that its rate will increase in future will be willing to purchase it at a more expensive than the existing one.
The rising demand for digital currency has got the attention of many people in the financial industry. Some of the advantages of investing in bitcoins include protection fraud, minimized risk of identity theft, direct transfer lower fees of transactions as well as the access to difficult-to-access markets. However, some of the limitations are the uncertainty of its legality, high volatility and high risks of loses. Conclusively, based on the above discussion, investing in Bitcoins might be a risk worth taking, having in mind the demand is growing tremendously, and the number of users is doubling yearly.