In the past few days, several people have asked me “what’s this Bitcoin that everybody seems to be talking about?” And “Do you think I should invest in Bitcoin?”
These are people that NEVER follow investments. Bitcoin must be really hot! It’s true that people have made millions in Bitcoin. It was in the $2 range back in 2010.
Recently, Bitcoin’s price has been skyrocketing with big swings throughout the trading days.
Currently it sits near 17,000! My nineteen year old son told me I should buy some a few months ago when the price was around $3,000. I choked and didn’t buy! I didn’t understand what it was and still have issues about investing in something that’s not tangible and I don’t fully understand how the price is determined. Knowing that Bitcoin had gone from two bucks to three thousand meant I was probably too late to the party. Still, I coulda hit a 5 bagger in a few months!
Where will Bitcoin Go From here is Anybody’s Guess. Here are two opposite opinions:
What is Bitcoin and how does it work?
Bitcoin is one of many Cryptocurrencies. Cryptocurrencies are digital currencies that sit on top of a technology called “blockchain.”
“Think of the blockchain as a massive public record of transactions (in this case, spending or receiving money). Each block that goes on the chain is a record of a transaction and that block is encrypted, making it highly difficult to hack the block. Once a transaction completes and a block is added to the chain, no one can modify the block — not you, not another member of the transaction, not anyone. This is a part of what makes the blockchain appealing to many different industries. It cannot be modified, therefore it ensures that the record of something will withstand the test of time (at least for now). Bitcoin is owned by a definitive number of people around the world. There are millions of computers around the world who are acting as record keepers in this consensus-based network and they are updating their system simultaneously together. This makes the entire network extremely safe and secure. From Let’s automate your money blog
Each time a person makes a transaction (i.e. sends or receives cryptocurrency), a network of “miners” must verify that the transaction is valid. This step is called “proof of work.” This is a big part of what makes the blockchain secure. I won’t go into it here, but if you want to understand this concept more, check out this post.
The blockchain is also decentralized, which means you don’t have to put your trust in a “benevolent” third-party financial gatekeeper. Traditionally, you go through a third party, such as a bank or PayPal, to exchange money. You’re trusting these institutions to keep your money safe or make sure your transactions and data are secure. But human error and nefarious hacking makes this centralized way of storing data vulnerable to costly miscalculations and security breaches. The blockchain doesn’t ask for your data and it won’t mess up your transaction (unless you do.) You just give over your “wallet” address, which is a string of 30 numbers and letters; you can verify that your transaction through the public ledger. This way you only need to trust the security of the network, not the banks.” from $he$pends blog
How do you buy Bitcoin?
Investing in cryptocurrencies is extremely easy. You just need to open an account in a reliable cryptocurrency exchange or wallet (Coinbase, Bitfinex, Bittrex, Bitstamp, etc), register on it and then you are ready to buy your first Bitcoin. You can make purchases through your credit or through your bank account.
First buy a small number of Bitcoin and then learn how to use the platform to trade in between different cryptocurrencies. You will realize how simple the technology is yet how volatile the currency is (which means bigger profit margins). Let’s automate your money blog
Get a wallet. The easiest way to do this when you’re just getting started is to go through the site Coinbase. This is a popular platform that hosts your wallet and allows you to buy and sell cryptocurrency with USD or trade cryptocurrencies for one another. Currently, Coinbase only supports Bitcoin, Litecoin and Ether — the top three coins in the cryptocurrency market. To set up an account, visit the Coinbase website, connect your bank account or card and, once Coinbase verifies your information, you can start building your investments. From $he$pends blog
Watch brief video showing how to use Bitcoin to purchase everyday items.
Can you buy Bitcoin in your IRA or Investment Account?
No & Yes. I don’t believe most custodians allow for that, but there is an alternative that might satisfy your appetite. Many brokerage firms will allow you to buy Bitcoin Investment Trust (BIT) shares (symbol GBTC). The BIT enables investors to gain exposure to the price movement of bitcoin through a traditional investment vehicle, without the challenges of buying, storing, and safekeeping bitcoins.
The massive upswing in price reminds me a little of the Dot.com Bubble of 1999-2000 when prices of internet stocks went to nose bleed prices before crashing down.
Any money people put into this is 100% speculative (read huge gamble) that I will not encourage to ever confuse with an actual investment.
Years ago I remember when baseball cards were really a hot thing and for a while my old card collection of ballplayers from the 1970’s was worth $10-15,000. Then, the bottom fell out and now, 20 years later it might be worth one third of that.
What scares me most about Bitcoin is that there is nothing tangible backing it. At least I could see and hold my baseball card and the Dot.com company had a business plan with some chance of producing income. I believe more people will make money off Bitcoin, maybe even BIG MONEY. I just wouldn’t want to be the last one in and stuck if/when it plunges for a reason I couldn’t explain.
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