What is Bitcoin and should you invest?

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Investment experts such as Warren Buffet and Alan Kohler may be highly sceptical of Bitcoin – and for good reason – because it’s a very volatile commodity based on an intangible currency. But one thing’s for sure, the incredible rise of this enigmatic cryptocurrency has certainly held the attention of investors for the past year or so.

It has also spawned several other virtual currencies that may warrant more investor interest because they still have room to grow in value, such as ethereum and litecoin.

But for now, Bitcoin has everybody captivated and asking whether they should buy some. Exchange markets are created by those who invest; if people place value on buying Bitcoin, its worth rises. Lately, the governments of China and South Korea have intervened in the cryptocurrency’s market and its value has declined. So has Bitcoin’s ship sailed already, or will its value firm again, potentially making it a smart investment?

What is Bitcoin and how does it work?
In 2008, a mystery software developer using the moniker Satoshi Nakamoto created a virtual data platform called blockchain, which gave rise to the digital currency (or cryptocurrency) known as  Bitcoin. The currency can be traded outside of the mainstream financial institutions and is used to buy things electronically. Bitcoins are created, using high-level computer software that allows users to “mine” or discover where in the virtual world the currency is hidden in a digital “vault”. Once you have acquired (bought or mined) Bitcoins, their notional value is stored in a virtual bank account called a “digital wallet” on the “cloud” or in a folder on your computer).

The major characteristic of Bitcoin is that it’s totally decentralised, meaning no institution controls it. Bitcoins are not tied to any country and in many jurisdictions are not regulated. You have total control over your Bitcoin wealth; you don’t need to give your real name or address, there are no transaction fees and you don’t need banks to buy, sell or use it.

How much is Bitcoin worth?
Online exchanges allow people to buy or sell Bitcoin using their own country’s currency. But Bitcoin doesn’t come cheap. At the time of writing, the digital currency now had a market value of more than US$272 billion. As of 8 December 2017, one Bitcoin would have set you back A$22,900. Last week, it crashed to  A$14,000 – so you can clearly see the volatile nature of cryptocurrencies.

More and more online merchants are accepting Bitcoin as a method of payment: you can buy concert tickets, manicures and even pizza. Some people are simply buying them because they believe Bitcoin is a smart investment. People can send Bitcoin to each other in much the same way as a regular bank transfer, using mobile apps or computers. 

What are the risks involved with Bitcoins?
The process of setting up a Bitcoin account may sound tricky but in fact, anyone can do it – it just takes time. However, as an unregulated marketplace, governments are concerned about taxation, security and lack of control. The names of buyers and sellers are never revealed, only their wallet IDs. This means purchases cannot be easily traced, making Bitcoin a favourite currency for people running illicit operations.

So, is it worth investing?
Unless you’re part of the one per cent, investing in Bitcoin means investing in part of one Bitcoin. One thing to note is that Bitcoin has zero correlation with the stock market, so it runs at its own speed.

There are a lot of mixed feelings about Bitcoin. Some economists are calling it the currency of the future, because it’s decentralising money and putting power back into the hands of individuals. Meanwhile, others are comparing it to Monopoly money, calling it a scam; an economic bubble that will burst with dire consequences.

Whether you know your way around investments, or you’re a newbie in the field, Bitcoin, like any other investment, is going to have its risks and rewards. If you can count on one thing, however, the rise in popularity and wealth of cryptocurrencies such as Bitcoin can’t be ignored, and will surely take us deeper into our digitised, economic future.

Read more at theguardian.com

Would you ever invest in a currency that you couldn’t handle? Would it be a good investment to buy a virtual currency today in the hope that in the future it will be worth so much more?

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39 Comments

Total Comments: 39
  1. 0
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    Keep reading and hearing about it. Still don’t understand. I wouldn’t put my money into anything I don’t understand. Prefer to have cash and deal in cash.

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      Hey, I invested 90% of my retirement payment on ICO Investment with the mindset of getting it multiplied and enjoying a better retirement life. It was sweet and smooth from the start, withdrawals were easy and consistent until it gets to a point I started to be denied withdrawals and that was how I lost all money, I couldn’t get my investment amount back not talk of the bonuses. I contacted several lawyers but it was all waste of time and money, they couldn’t render an inch of help. God so good to my old self and family, I later met with a certified binary options recovery expert that helped me recover my money from the brokers, it was worth it to pay him 20%. You can contact the expert on his Email if you have found yourself in same situation as me, I can assure he would be able to help you just as he helped me, you can give him a try if you don’t mind.
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  2. 0
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    When you read about apparent support of bitcoin you have to wonder if the end is close and average people get stung in this big game of musical chairs. What else ever changes.
    Bitcoin technology is here to stay. The only thing which is uncertain is if governments will bring in their own versions and make all others ‘illegal’. That to my way of thinking is the real risk to ‘investing’ in this technology.
    Is digital currency going to replace what we have? 100% YES. The question is when and how. Wish I had bought when I first saw them around $300. Such is life!

  3. 0
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    Its a real risk and expensive at the moment but you never know which way it is going to go. If you are a gambler and have excess money have a go, you can make several grand in a week but also lose it, if it goes down sit on it until it goes up and hope it doesn’t disappear
    .
    I personally have a good go at the share market and it can go either way but if my money goes down on a particular share I sit on it until it makes its way back or goes bust.
    I have mixed feelings about these currencies and really don’t know which way to go.

  4. 0
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    It appears the current silly season still has legs…….so now we are informed the bitcoin
    market “runs at its own speed …..”. Actually the market for bitcoin is fundamentally
    the same as any other commodity where the interaction of supply and demand
    determine price and price fluctuations.

    What is unclear to the uninitiated ( including myself ) is whether the cryptocurrency
    market is a ” fair market ” where buyers and sellers have access to the same information
    at any point. It appears these markets are not independently regulated and are subject to
    random intervention by governments which indicates the stockyard gate was left open
    enabling the livestock to depart…… so to speak.

    In terms of risk v reward – the risks are real and considerable, the rewards appear
    low percentage and controlled by the insiders…..

  5. 0
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    Most world currencies have gold backing, this appears to have none. Maybe it is like modern computer technology and based in the clouds and when the wind blows away it goes as well.

  6. 0
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    I agree with Warren Buffet so I’m in good company. I watched my grandson playing an Internet game the other day and he paid $30 for imaginary cabbages so he could win the game. Sounds like Bitcoin to me. Good luck with your investments but count me out.

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      Wow, your grandson is Scott Morrison. Gee!!

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      Bitcoin sounded to me like a modern version of the Cargo Cult, build a big model of an aeroplane and the goodies come, build a model of modern banking and likewise, – until they don’t.
      In the meantime all the attractences of Pyramid and Ponzi play their part, but what should real money be based on?
      Think about it, – we don’t normally buy something that is of no value to us, so currency is based on Value.
      People make, produce, grow, things, the things we value, food, clothes, houses, services, inspiring paintings, a good football game, education for our children, the infastructure needed for our civilisation.
      But people who gamble, currency traders, share market high speed computer buy and sells, con artists, Public Servants, except to the degree that they actually do help the public they are supposed to serve, thieves, people who do nothing but live on “interest”, and many others, are just parasites, sucking on the jugular of civilsation, and generally the Super Rich, also fall into that category.
      The Bit Coin debate is a healthy one because it challenges many basic assumptions, we do really need to look at the whole economic process we are surounded by, and the points of view of the main players, – Manufacturers, Traders, Consumers, each of which may have a different idea of value to themseves, and indeed we may each live more than one of those roles, – after all we are all consumers, so that quite subjective,yet real, almost ineffable concept, Value. seems to me to be the place to start.

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      Jim I don’t think he is but who knows. Ha ha

  7. 0
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    At first I ignored it. As I didn’t understand it. But when I saw the profits people were making I educated myself in it. And thanked friends for introducing it to me. I had my head in the clouds. But now I know it’s here to stay. And we are still in the beginnings of adoption. It’s a good time to get into it. ( January always low , same every year ) And as it rises enjoy the profits.

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      If it sounds to good to be true it generally is. Does anybody remember Pyramid Building Society in the late 80’s. They were paying over 20%. what happened they went bust and everyone lost their. money

  8. 0
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    Is now the time to stop making risky investments?

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      People who like to bet are always taking higher risks to make up for their losses. To my mind sound long term planning was the way to go. If you’re on this site it’s probably too late.

    • 0
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      Your on this site. Is it too late for you ?

    • 0
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      Scottishlass I guess you’re talking to me? Yes it’s too late to make any real change to my financial situation without a great deal of risk. But my financial situation is great and only getting better, I made sound decisions long ago.

  9. 0
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    I am a bit confused about all you people who trade on the stock market and call Bitcoin trading gambling. You know nothing!! Of course bitcoin is gambling so is the share market. So stop being all high and mighty, snobs!!

    • 0
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      You think Bitcoin is the same as the share market. We don’t object to you investing your life savings in it. But we won’t.

    • 0
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      I’m with you there Tib. The share market is only a gamble if you don’t know what you are doing. Get a good financial planner and let them sort things. If you are sick you go to a Doctor. Car problems you go to a good mechanic. Everyone has there place in life. Same with money, you have worked hard to get some savings, let someone who knows what they are doing invest it for you.

    • 0
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      I agree that the share market is only a gamble if you don’t know what youre doing. But I don’t like financial planners I have yet to meet a good one.

    • 0
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      I have had my financial planner for the last 8 years. No complaints, he knows what he is doing, and is doing a very good job. I keep a check on my financial status. And we have regular discussions.

    • 0
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      Of course the market is a gamble, just walking out your front door to go shopping is a gamble. But when an individual buys stocks they can investigate the history of that stack, they are allocated a material copy of the value of that stock and can verify that the stock in question is real and backed up by assets or cash.

      Can the same be said for Bitcoin? To me Bitcoin is similar to the old Chain Letter type of scheme, the first two percent do well but the rest lose out as victims run out.

      As far as Financial Planners are concerned, I found one that taught me how the market works and how to make my own decisions, I haven’t seen him for six years and am doing quite well. Define your risk tolerance and go from their, mine is low to medium and I am currently pulling about 6.5%/7.0% from my own account, my Super is doing better but I like to have some money that is completely controlled by me.

  10. 0
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    Yes I would recommend anyone who wants to get rich especially those nearing pension and haven’t got much savings
    Great way to make easy money .
    Bitcoins will be worth $100,000 and will eventually go up to $1million where it will stabilize at that value .
    Crypto Blockchain Tulips are best – watch out for that one . Buy as soon as it comes out , you will thank me when you’re a multimillionaire

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