Surely many of you have heard of such a thing as Bitcoin. It is a cryptocurrency that can be used to pay online without having to pay interest to banks and other familiar financial institutions that you can mine at home from the comfort of your couch. But let’s take a closer look at how it all works. Let’s find out all you should know about new technology and how to manage it.
We should probably start with the main features. Bitcoin is a peer-to-peer, decentralized, and anonymous cryptocurrency. All transactions take place directly between subjects on the principle of p2p (peer-to-peer). There is no central authority of currency management and emission centers such as a central bank. All transactions made from one subject to another take place using cryptological keys that protect transfer from the interference of third parties.
Potential investors should understand about new technology that Bitcoins are a high-risk asset. On the one hand, Bitcoin can be seen as both a currency and a new payment technology that emerged during the globalization of the economy as a response to the evolution in modern technology.
However, there is still no understanding of what criteria Bitcoin should be judged on and how much it should be worth. The fact that Bitcoin and cryptocurrencies, in general, are not tied to any particular tangible asset makes it impossible to make predictions about how long the growth will last and when the downside will come. Analysts’ opinions on this matter are polar – from unbridled optimism to predictions of the next very big tech bubble.
Investors also began to invest in Bitcoin, which has shown rapid growth year after year, and many have been able to make fortunes from it. Analysts vividly predicted the fall of the currency, which can not indefinitely grow at such a rate. In fact, we saw its instability just recently. Whether it makes sense to invest in Bitcoin today is a big question.
One of the alternatives that you should know about new technology is a stock exchange, which allows making a good profit not only on growth but also on the fall of currencies. True, a non-professional investor is unlikely to do it without an adviser. And there already are such in this market.
The second option – is to invest in new currencies at the time of their issue, when they are as cheap as possible, and after that, it is profitable to resell them.
Initial Coin Offering (ICO) is a mechanism for raising finance for projects or companies to develop and release a product on the market. Attracting investment occurs in cryptocurrency (Bitcoin, Etherium, Litecoin, etc.). Unlike the IPO (public offering), the token offering process is unregulated: it requires almost no financial investment, there are no minimum requirements for the issuer, no audit, and other related IPO procedures.
The IPO on the cryptocurrency market has opened a new opportunity for investors to multiply the invested funds by hundreds or even thousands of times. In this case, at the initial stage, digital coins are extremely cheap.
Startups seeking to make money from ICOs have also become very numerous. At the same time, no one guarantees anything. The industry is not yet regulated at the state level. As a result, there are scammers among projects who take investors’ money and simply disappear.
And there are unprofessional teams, perhaps with good intentions, but without the relevant experience to successfully implement the project. The ICO market is very risky: you can make a good profit and lose everything on it.
The process of generating digital coins made it possible to make money for investors who managed to dig in at the right moment. It was possible to do this by having a powerful computer at home.
Competition among miners is high. By buying a regular powerful computer, you would not make much money. The miners, who started with ordinary computers, managed to expand considerably in terms of their technological base. New investors are building entire mining farms so that the earnings have become substantial. Moreover, not only private investors are investing here, but also large corporations. Therefore, for non-professional players with small capital this tool in its original form is no longer suitable.
Businessmen have found a solution to this problem. Some companies build mining farms using the money of investors and divide the profit among all. It turns out to be a kind of collective investment. For example, BitClub Network does exactly this.
One Bitcoin can be divided into 100 million pieces. As a result, there is no minimum threshold amount to start buying and selling Bitcoins. Generally speaking, it can be an advantage: you can work out your trading strategy on the Bitcoin exchange at first, and then decide how much you are ready to invest and for how long.
As in the case with any investment asset, we advise you to follow the well-known rule – “Don’t put all your eggs in one basket”. Since we are talking about “particularly fragile eggs,” it hardly makes sense to invest more than 10 percent of your available cash in Bitcoins. However, each investor has his ideas about the limits of acceptable risk.