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Is trading bitcoin worth itIs Bitcoin a Good Investment? • Pros & Cons in • Benzinga
The main argument being that the type of fair launch and organic growth that Bitcoin had is impossible to replicate in a world that already knows so much about cryptocurrencies. Currently, the creation of money is in the hands of a few people whose interests are not aligned with the rest of the population. Bitcoin aims to change that and hence completely redefine the way that humans think about and interact with money. A notable example is the existence of inflation, which essentially is the percentage of value that fiat money loses every year due to the increase in the money supply.
Bitcoin has a hardcoded monetary policy that cannot be violated, and that makes it a form of money protected from the manipulation that fiat money is subjected to. This hardcoded monetary supply is illustrated by the 21 Million coins supply cap of Bitcoin, and is enforced through the Bitcoin block reward, which is an algorithmically determined amount of Bitcoin that is generated every block about 10 minutes. Let that sink in. It offers very similar qualities to gold, while also improving upon them at the same time.
Some of the most notable ones are the following:. Since the Bitcoin network is not controlled by a central entity, transactions on the blockchain cannot be stopped or rolled back. This makes Bitcoin possibly the most uncensorable money and digital currency in the world. This is very powerful for a variety of reasons, but most importantly it enables people to protect their wealth from authoritarian regimes and it enables truly open commerce.
Therefore, what some citizens have decided to do is to store their value in Bitcoin. They can now also easily use that Bitcoin to buy goods and to quickly send it to friends or family abroad if necessary. Many supporters believe that Bitcoin will not only become digital Gold, but that it will in fact eventually kill-off and substitute fiat currencies like the US Dollar, to become the world currency.
Enter Lightning Network LN. LN is a Layer 2 scaling solution for Bitcoin, meaning that transactions are not going through the main blockchain but through sidechains. This makes individual transactions a lot cheaper and throughput seemingly ceilingless. The main limitation of LN is that it can only process as many transactions as many Bitcoins are locked in the network in the form of a channel.
That being said, the growth of the network capacity has been remarkable and shows no signs of stopping anytime soon. With scalability solved, Bitcoin now has what it takes to truly become a global form of money, which leads us to the next point. Aside from thousands of merchants accepting Bitcoin worldwide, an interesting trend to watch is one of citizens in third world countries adopting Bitcoin to protect their wealth.
As can be observed in the chart above, the trading volume of Bitcoin in Venezuela has gone through the roof. This is a clear sign of people adopting Bitcoin as a new currency when their national currency has failed. Finally, big investors all around the world are starting to get increasingly interested in Bitcoin. Many speculate that this is not only due to quickly growing adoption but mainly due to global economic uncertainty and fear due to the outlandish amount of debt that is the foundation of the fiat money system.
Large institutions, like Fidelity, Nasdaq, and JP Morgan have all publicly announced that they are buying Bitcoin or that they are building bitcoin-related products for their millions of clients. However, this is likely just the tip of the iceberg.
It is very probable that dozens of additional institutions and possibly even Governments are also working behind the scenes on Bitcoin infrastructure but have not announced so to the public yet. Is it safe to buy Bitcoin? Absolutely not, and everyone telling you otherwise should probably not be trusted.
Bitcoin is still a very young digital currency, and also a new highly volatile asset. Furthermore, Bitcoin is still largely an experiment and you should treat it as such. You should never invest in Bitcoin more money than what you can afford to lose. Due to the speculative nature of Bitcoin, even mere rumors like a country potentially regulating Bitcoin can already cause a significant price drop and deep losses for investors. Bitcoin is a network, and hence unlike Gold, its existence could potentially be threatened by a single bad actor.
If Bitcoin mining continues becoming more centralized, the risk of a network attack may become greater as Bitcoin starts threatening the currencies of major Governments. On the flip side, if Bitcoin mining were to become more decentralized, the bigger Bitcoin becomes the stronger the blockchain gets. This would make a successful attack a lot more challenging. We have seen over and over again that the first version of a technology is often not the one that ends up sticking around forever. This has been the case with mobile phones, cameras, and even social networks.
Fact is, there is a very little precedent on this and therefore this point might indeed hold true. Bitcoin is built on a deflationary model, meaning that the value of money increases over time. This is a strong contrast to the fiat money system, which through inflation is designed in a way that money loses its value. There are two main schools of economics that explore these two economic models: Austrian economics and Keynesian economics.
Austrian economists believe that the world needs a deflationary monetary system to flourish, while on the other hand, Keynesian economists believe that inflation and debt are necessary to encourage economic growth. As stated earlier, once Bitcoin grows to a certain size where it starts to threaten major fiat currencies, Governments may take coordinated action to shut Bitcoin down. One approach would be to illegalize Bitcoin exchanges and hence prevent investors from buying it. They might even go as far as legalizing Bitcoin and making anyone holding coins legally liable.
Something similar has already happened back in when the US Government made it illegal to hold gold , and confiscated this precious metal from its citizens. That being said, unlike Gold, Bitcoin is not a physical asset that can easily be identified by the Government. An individual could simply memorize the private keys to his coins, or even send them to friends or family abroad with just the click of a button.
Therefore, such an endeavor could only be successful if coordinated on a global scale. And as history has shown in multiple instances, Governments are notoriously poor at coordinating on an international level, which would make a crackdown of this magnitude rather unlikely. Bitcoin is still a new high-risk and extremely volatile asset that should be treated with caution.
It is definitely not the right asset for anyone and you need to be aware of that if you want to avoid unnecessary stress. You have probably noticed that all of the above 3 profiles have one thing in common: they are not investing more money into Bitcoin than what they can afford to lose. If you are a person that can handle wild market swings and that has some money set aside for high-risk investments, then Bitcoin might be a good option for you.
In a research report by Finder. Since the research only involved a few thousand people, these numbers may not be entirely correct, but it does give you an approximate idea of the group of people that you are joining when you buy your first Bitcoin.
Having a framework that you can follow will make it a lot easier for you to handle the wild price swings of this digital currency. Although there are a few more, in this article I will show you the 3 most popular Bitcoin investment strategies that you can start following today. Yes, that is not a typo. This is by far the simplest way of getting exposure to Bitcoin because it does not require any active management from your side, and since Bitcoin has been in a long-term bull trend ever since its inception, it might also prove to be very effective.
Dollar cost averaging is a strategy also often used in stock market investing. It essentially consists of buying small chunks of an asset periodically every week, or every month in order to minimize the risk of buying at the top.
Therefore, if you are not comfortable with timing the market then dollar-cost averaging may be the right Bitcoin investment strategy for you. Finally, the last strategy is to actively manage your portfolio. Bitcoin miners earn bitcoin by collecting something called the block reward plus the fees bitcoin users pay the miners for safely and securely recording their bitcoin transactions onto the blockchain. Roughly every ten minutes a specific number of newly-minted bitcoin is awarded to the person with a mining machine that is quickest to discover the new block.
Originally, in , Satoshi Nakamoto set the mining reward at 50 BTC, as well as encoding the future reductions to the reward. The Bitcoin code is predetermined to halve this payout roughly every four years.
It was reduced to 25 BTC in late, and halved again to The second source of revenue for Bitcoin miners is the transaction fees that Bitcoiners have to pay when they transfer BTC to one another. This is the beauty of Bitcoin. Every transaction is recorded in an unchangeable blockchain that is copied to every mining machine. Every miner needs to know the relevant tax laws for Bitcoin mining in his area, which is why it is so important to use a crypto tax software that helps you keep track of everything and make sure you are still making enough money after you account for taxes.
First of all, Bitcoin mining has a lot of variables. This is why buying bitcoin on an exchange can be a simpler way to make a profit.
However, when done efficiently it is possible to end up with more bitcoin from mining than from simply hodling. One of the most important variables for miners is the price of Bitcoin itself. If, like most people, you are paying for your mining hardware, and your electricity,- in dollars, then you will need to earn enough bitcoin from mining to cover your ongoing costs; and make back your original investment into the machine itself.
Bitcoin price, naturally, impacts all miners. However, there are three factors that separate profitable miners from the rest: cheap electricity, low cost and efficient hardware and a good mining pool. Electricity prices vary from country to country. Many countries also charge a lower price for industrial electricity in order to encourage economic growth.
This means that a mining farm in Russia will pay half as much for the electricity you would mining at home in the USA. In practical terms.
These days there are several hardware manufacturers to choose from. The price of hardware varies from manufacturer to manufacturer and depends largely on how low the energy use is for the machine vs the amount of computing power it produces. The more computing power, the more bitcoin you will mine.
The lower the energy consumption the lower your monthly costs. Longevity is determined by the production quality of the machine. It makes no sense to buy cheaper or seemingly more efficient machines if they break down after a few months of running.
One useful way to think about hardware is to consider what price BTC would have to fall to in order for the machines to stop being profitable. You want your machine to stay profitable for several years in order for you to earn more bitcoin from mining than you could have got by simply buying the cryptocurrency itself.
Unfortunately most older machines are now no longer profitable even in China. The Bitmain S9 has been operational since and interestingly enough they are still being used in Venezuela and Iran where electricity is so cheap that it outweighs the risk of confiscation. There may, eventually, be more reputable sources of sub 2 cents electricity as the access to solar and wind improves in North America.
For the individual miner, the only hope of competing with operations that have access to such cheap electricity is to send your machines to those farms themselves.
Not many farms offer this as a service though. These days, every miner needs to mine through a mining pool. Whether you are mining with one machine, or several thousand, the network of Bitcoin mining machines is so large that your chances of regularly finding a block and therefore earning the block reward and transaction fees is very low.
With one block per 10 mins they may have to wait 16 years to mine that one block. The oldest two pools are Slush Pool and F2Pool.
Here comes the science part…. Pool fees are normally 2. Choosing the right mining pool is very important, as you will receive your mined bitcoin sent from the pool payouts every day.
An often overlooked facet of mining profitability is the fees one pays to sell the Bitcoin one mines. If you are a small time miner, you may have to sell your coins on a retail exchange like kraken or binance. Sometimes your fees are low but sometimes your fees are high - it really just depends on the fee structure of the exchange and the state of the orderbook at the moment. However, if you are a professional miner like F2 or Bitmain, you likely have really advantageous deals with OTC desks to sell your coins at little to no fees - depending on the state of the market.
Some miners are even paid above spot price for their coins. If you think you have what it takes be mine profitably, we suggest you make sure first by using our mining profitability calculator. Bitcoin farms that operate at scale use these advantages to maximize their returns. As the difficulty of mining bitcoin increases, and the price lags behind, it is becoming harder and harder for small miners to make a profit.
It all comes down to scale and access to cheaper prices. When people enter the space, without prior relationships, they struggle to compete with established mining operations. Bitcoin mining is starting to resemble similar industries as more money flows in and people start to suit up.
With increased leverage, margins are lower across the whole sector.