Bitcoin is a decentralized cryptocurrency payment system that was released to the public in 2009, but became popular in the last few years. There is a cap of 21 million bitcoins and this finite number has made some investors view Bitcoin in a similar way to gold (which is a finite resource). With the significant gains that the currency has made over the last few years, investors around the world have been buying and investing in bitcoin.
How to Invest in Bitcoin
Different countries have different ways of buying bitcoins and you need to understand the options available in your country before you can begin investing in Bitcoin. Developed countries have more options available and there is higher liquidity in these countries as well.
The simplest way to invest in bitcoin is to buy it from an established firm that buys and sells the cryptocurrency. You can buy from a company where it is even possible to set up auto-buy orders for bitcoins. These automatic buys generally do not give you a choice in the price you pay for the bitcoins. There are companies that operate across the world. There are also companies that pair potential bitcoin buyers and sellers with the exchange taking place offline. Alternatively, it is possible to trade in bitcoin on a bitcoin exchange. There is relatively high liquidity in the Bitcoin market with people always available to buy or sell. The price of bitcoin is set by what people are prepared to pay and is generally listed as the price of one bitcoin. However, sites often allow you to buy a set amount, even less than one bitcoin.
Before you invest in Bitcoin it is worthwhile to analyze charts and historical data. As Bitcoin is a global currency it is important to look at global politics and economics, as opposed to local issues, when considering how Bitcoin’s price will be affected. There are tools that can be used to analyze Bitcoin charts.
Investing in Bitcoin for the Average Person
Bitcoin has many attractions, particularly its gain over the last few years. It gained more than 300% from 2011 to 2012 and in the last year it has gained around 400%. In the first half of 2014, venture capitalist companies made 57 million investments in Q1 and 73 million investments in Q2. However, bitcoin is a particularly volatile currency which can be inactive for long period of time and then swing up and down in short periods of time. Bitcoin cycles can last only a year or so, which is a much shorter timeframe than stocks. This volatility means that bitcoin may not be a suitable investment option for the average person.
Bitcoin has been around for less than a decade making it a new currency and new investment opportunity. Before you begin considering investing in Bitcoin it is important to understand how Bitcoin works, the impact that global politics and economics can have on Bitcoin and the impact that Bitcoin can have on the world.