The talks of Bitcoin have gone global. Even outside of crypto circles, it has been dubbed the hottest ticket in digital asset investment today.
This is a complete Bitcoin overview. You’ll learn about Bitcoin’s concept, origins, and current influence on the financial industry.
Bitcoin’s News
- Bitcoin price has finally increased to over US$ 31,000 or by 7% after being stuck in the red zone for 9 weeks straight at US$ 30,000.
- JPMorgan estimated the fair value of Bitcoin at US$ 38,000 which is 28% higher than the current price. He also mentioned that cryptocurrency has overgrown real estate in terms of alternative assets.
- Bitcoin price dropped lower than US$ 30,000 which is 10% of the 24-hour coin value which is the first falling point since July 202. Experts agree that Bitcoin may see a further decrease.
What is Bitcoin?
Being a cryptocurrency, Bitcoin is a digital currency whose transaction proceeds in a decentralized network. The term ‘Bitcoin’ first appeared in the anonymous Satoshi Nakamoto’s Whitepaper in 2018. It was officially released in January 2009.
The Bitcoin network is built on top of a Peer-to-Peer (P2P) system. It enables people to trade the currency directly, publicly, and transparently, without the need for central authorities.
Bitcoin is open-sourced; where the network can be accessed and shared publicly, and nobody can claim ownership or control over the system. In fact, this cryptocurrency is also intended to be used as a medium of exchange in the real world.
Who created Bitcoin?
Satoshi Nakamoto is credited as being the creator of Bitcoin, and remains unidentified to this day. Despite this, it is deemed a fascinating topic to learn about the origins of Bitcoin.
In October 2008, Nakamoto unveiled the Bitcoin whitepaper, which presented the Peer-to-Peer innovation aimed at transparent and decentralized transactions via a cryptographic algorithm in the network called blockchain.
In January 2009, Bitcoin’s blockchain went live for the first time, as Nakamoto mined the starting block of the chain with a value of 0 USD. At that time, Bitcoin mining required only sophisticated software to succeed.
Nakamoto also gave ownership of the Bitcoin Foundation’s source code repository and network alert key to Gavin Anderson, the Bitcoin’s principal developer at the time. Bitcoin’s public visibility started to grow around this moment, as more people from across the globe began to adopt and upgrade its software.
Bitcoin and Blockchain
All cryptocurrency, including Bitcoin, relies on blockchain technology for their survival. The blockchain is a digital ledger that processes transactions and stores them in the form of blocks in the chain. Each chain will be arranged according to the time sequence of transactions, including contracts, personal information, bonds, and many other details about the users.
In the network’s blocks, the data is accessible to all users, allowing them to verify it while being encrypted to prevent any hacker attacks.
Bitcoin leverages SHA-256 as its cryptographic hash function on the blockchain. When a transaction is requested, the blockchain system copies existing information from previous blocks to new blocks containing new information. Later, the system will go through a cryptographic procedure in which validator nodes will mine data to validate it. Once validation is completed, new blocks will be added to the chain, and miners that successfully add the blocks will be rewarded with bitcoins.
Values of Bitcoin
Speaking of Bitcoin’s value, it serves as a decentralized store of value, with its owners having the same ownership rights as they would have in any other asset. As a matter of fact, Bitcoin is a unit of account.
Even still, the topic of Bitcoin’s unit of the account remains divisive. According to Bitcoin’s community and experts, Once bitcoin is used more extensively, it may lead to a new financial world in which sub-measures play an even bigger role and effect transactions than ever before.
The smallest unit of Bitcoin is Satoshis (Sats), as 1 Satoshis is equal to 0.00000001 BTC. Currently, 1 Satoshi is at 0.00048 USD.
Instead of being used as a loan payment, Bitcoin is inherently a store of value. Many individuals choose to buy and then “HODL,” or “hold on for dear life,” rather than use this currency as a means of payment.
What is Bitcoin’s Mining?
Bitcoin mining is not just a means of earning money; it is also a method of ensuring the integrity and security of blockchain transactions. It also aids in the network’s capability as a “trustless system” without the need for central control.
To mine Bitcoin, one must be provided with proper tools and have a fundamental grasp of its process. Another option is to make use of a bitcoin mining website to improve the efficiency of mining bitcoins.
How to Buy Bitcoin?
Starting trading Bitcoin is just a simple thing. All you need to do is learn a few trading steps and have a crypto wallet to secure your Bitcoins. During the account opening process, there will be a KYC (Know Your Customer) or verification process according to your jurisdiction. For those interested in buying Bitcoin, you can open a Zipmex account and read about our platform’s terms and conditions before you begin trading.
There are several crypto trading platforms available, but only those that have been approved by the Securities and Exchange Commission (SEC) can be relied upon to make sure your money is in trustworthy hands.
Is Bitcoin a Good Investment?
Cryptocurrency is a risky trade. While stock trading has a circuit breaker to stop short-term trading in the market, Bitcoin trading has no such mechanism in place, making it riskier than stock trading. Also, there’s still no concrete regulation to monitor the market yet.
Even so, Bitcoin remains a good investment. For example, you could profit by 96.81 % if you buy Bitcoin at the beginning of 2019 and sell it at the end of the year. Coinmarketcap‘s data shows that Bitcoin’s value grew from 3,706 USD in January 2019 to 7,293 USD in December.
But when it comes to investing in bitcoin, risk tolerance must be managed. Therefore, It’s important to diversify one’s portfolio investments since Bitcoin comes with a high risk of losing a substantial amount of money.
What is a Bitcoin ETF?
Bitcoin ETF is now a ew exposure for anyone who wants to invest in this cryptocurrency. Instead of a cryptocurrency exchange, Bitcoin ETF allows people to trade and profit from funds composed of bitcoins or assets related to Bitcoin’s price.
There are 2 types of Bitcoin ETF; you can invest directly in bitcoin’s real-time price, or invest in bitcoin futures contracts at a predetermined price at a specified time in the future.
If you’re interested in Bitcoin ETFs, check out this article for more information and a list of Bitcoin ETFs which are available in 2022.
What can I do with Bitcoin?
Even while Bitcoin is not as commonly recognized as cash or credit cards, many institutions and individuals are starting to embrace it as a form of payment. Bitcoin also has many other benefits, such as:
International Transfers
Depending on the exchange you use, for as little as 0.4% of the transaction, you can transfer your funds and they will arrive there within the hour, instead of paying a 30+ USD fee and waiting for days for your funds to hit the other account to get your money.
Transactions
Some countries today have embraced Bitcoin instead of cash. A great example is El Salvador, in which the government has regulated Bitcoin as a legal tender within the country. It also unveiled a plan for Bitcoin City, a smart city with a full base use of Bitcoin in the future. Also, the Central African Republic also has recently adopted Bitcoin as an official currency in late April 2022.
Storage of Value
Despite its volatility in price, Bitcoin is an excellent means of preserving wealth in an inflationary situation. Its bitcoin is tied to world events, such as pandemics, wars, and the economy, much as stock, or gold. This is doubly true when the monetary values of certain nations are unstable.
In a country like Venezuela, where hyperinflation makes your millions turn to zero overnight, Bitcoin provides an alternative to store your money despite its volatility.
Trade
Since Bitcoin’s price is still volatile; it provides a lot of opportunities for trading. You can think of it as buying a financial asset (e.g. stocks) when the price drops and selling it later when the price increases.
However, volatility means a higher frequency of price changes, so you have more opportunities to capture the gains of such price differences compared to stocks. Some people (informally called Holders) believe that the more Bitcoin gets popular, the higher the prices, so they just keep buying and holding as a form of savings.
Pros and Cons of Bitcoin
Don’t make any quick decision yet. Before determining if Bitcoin is good or bad, let’s take a look at its pros and cons first.
Pros
- Accessibility and liquidity: The financial world has become borderless thanks to Bitcoin. In only a few minutes, users can use bitcoin as a form of payment for retailers and service providers. In addition, It also makes international trade and exchange simpler than ever before.
- User Anonymity and Transparency: Bitcoin’s holders will be identified by numerical codes and public keys, which helps prevent public tracking and data leak. On top of that, data of transactions in blockchain will be only known and verified by users in the network only.
- Independence From Central Authority: Bitcoin is a decentralized currency, making it free from any single body or central regulation.
- High Return on Investment: Despite its volatility, bitcoin can generate high-profit potential. As a result, the value and prospects of bitcoin continue to grow as investors and companies from other sectors join the market.
Cons
- Volatility: With a supply of just 21 million, Bitcoin has always been in limited supply. Bitcoin’s value is based on its scarcity, which makes it both expensive and volatile. Other factors that have a substantial impact on the price of bitcoin include manipulated stock headlines, uncertain value storage, and lack of data security.
- No Central Regulations: There are benefits and drawbacks to adopting a decentralized cryptocurrency system. In contrast to a fiat currency, bitcoin transactions are unregulated and there is no assurance of a predetermined value. As a result, the value of bitcoin might be dramatically reduced if a large number of investors abandon their positions.
- Irreversibility: As soon as a bitcoin transaction is completed, the data will be added to the chain. Therefore, if the wrong amount or the wrong recipient is sent, there is nothing that can be reversed. Also, Losing your crypto wallet’s private key might potentially result in the loss of your valuables.
- Limited Uses: While a few enterprises have begun to use Bitcoin, the innovation has yet to gain widespread acceptance. The usage of credit cards and fiat money has thus been required.
Challenges for Bitcoin
Bitcoin and cryptocurrencies deal with a variety of risks. This is a result of government regulation, which guarantees security, market volatility, and cybercrime.
Bitcoin has the potential to disrupt a variety of sectors if it is highly regulated. This has led to a backlash against Bitcoin regulation in many countries. Indeed, there are still several restrictions, like the taxation of crypto, that are just in their infancy.
Cyber security is also a big concern. Until bitcoin is widely accepted, there are still chances for malicious individuals to take advantage of its inexperienced users. This also raises so many worries about Bitcoin’s vulnerable image, and it is claimed to be the most cybercriminal cryptocurrency.
Last but not least, bitcoin investors must contend with the volatility of the market. To make an informed choice before buying bitcoins, it is essential to research and understand the workings completely, as well as to keep up with the news on a regular basis.
Is Bitcoin legal?
The legality of Bitcoin differs from nation to nation. Some countries allow the trade of bitcoin, while others have already made it legal tender.
New Zealand and Japan are among the countries that have recognized bitcoin as legal cash in April 2017 and have authorized its usage to legalize wage payments.
El Salvador, on the other hand, has the potential to fully use its bitcoin acceptance. To encourage its citizens to utilize bitcoin, the country’s government has legalized the currency and made it an official currency. In 2022, the Central African Republic will become the second nation in the world to recognize bitcoin as a legal currency.
Bitcoin trade has been subject to legislation in numerous countries. It also covers the United States Bank Secrecy Act where crypto trading exchanges must be regulated before they can begin trading. According to a 2020 statute, China’s central bank developed its own digital currency, the “digital yuan,” and imposed a ban on all crypto-related activities in 2021.
In Singapore, the use cases of Bitcoin also have been widely adopted. Check out Zipmex guide on How to buy Bitcoin in Singapore, or click to get started.
