Once again, Bitcoin is a riding tide. Learn how to surf the wave correctly and reap the benefits.
Thanks to the incredibly volatile market, bitcoin has been able to turn donuts into some serious dollars. But, buyer beware, with the rollercoaster market can come some devastating pitfalls if you don’t invest properly.
For any newb looking to break into the market, or for seasoned investors, it’s important to start with a trustworthy broker or trading sites (for example, a super popular one is Bitvavo), a decent wallet to store your coin and read up on important market trends.
Trading bitcoin has made millionaires out of a good many people, but it’s not as simple as it seems. Ensure that you have a good grasp on not only the market, but also on bitcoin as well as it’s associated technologies. Whatever your level of expertise- strap in, because it’s bound to be one hell of a ride.
What is Bitcoin?
Bitcoin is a type of online currency (cryptocurrency) that’s been in the spotlight since it’s massive boom in 2017. What makes cryptocurrencies so incredibly unique and exciting to trade is both their market volatility, and inherent stability.
Bitcoin is a decentralized currency- meaning that there is no bank or other financial institution that is involved in its trading. No middlemen, no surprise surpluses of goods, few rules. Because of this Wild West-esque infrastructure, it’s made a few people some serious gold.
What allows this particular cryptocurrency some inherent stability is that there is a finite number of bitcoins available in the world. Meaning that the market is purely driven by supply and demand and has a very predictable inflation rate. This is due to only 21 million bitcoins being available in the world. Ever. While 80% of that figure has already been obtained, we won’t see the market cap for another 120 years.
How is Bitcoin Obtained?
There are some pretty standard ways to get your hands on some bitcoin. You can buy it and sell it similar to regularly traded stocks, or- you can mine it. To get those 21 million coins into the market, “miners” race to solve ever more complicated mathematical equations, and whoever solves it first gets a prize.
The mathematical equations that miners are set to task upon are actually what validates bitcoin transactions. These equations form an immutable ledger. While the ledger is public and anyone can view it, once it is properly solved and cataloged, it’s impossible to change. As miners solve these equations, they are rewarded in bitcoin and the newly solved equation is added to the long chain of other transactions within the ledger. This is called blockchain, a technology that is incredibly important in the tech game right now.
Currently the winning miner will be paid 12.5 coins for each numbered riddle they solve, but that’s set to change in the coming year. Miners will soon only be awarded 6.25 coins, and then see that number half again in another few years- keeping a lid held tight on inflation.
What’s the Market like now?
Because of the bitcoin reward being halved from it’s previous bounty, traders are expecting a large increase in the purchase of bitcoin in the coming months, giving us a market surge. Dwindling available coins are making them much more appealing for purchase and trade, driving the market up.
However, experts are having trouble agreeing that this is the only reason the market is on its way up currently. Social media giant, Facebook has announced that it will soon be forming it’s own cryptocurrency for trade. Libra, the companies new coin, is effectively putting these types of currencies back on the map and tying them to a familiar and well known name.
Facebook also plans to partner with payment companies like Visa, Stripe, PayPal and Mercado Pago to get more merchants readily accepting Libra. Hopefully making the decentralized market more accessible and user friendly. Suggesting that this will also increase the value of other cryptocurrencies.
The current trade war between the US and China has got some savvy investors using popular cryptocurrencies as a maintain asset while other more traditional markets are plummeting.
Whatever the theory is as to why the cryptomarkets are seeing renewed vigor, there’s no doubt that there is a surge. But the volatility of the cryptomarkets isn’t something to be snifffed at. In late 2017, bitcoin saw a record high of nearly $20,000 per coin, shortly before plummeting to just under $2,000 less than a year later. This volatility creates a high risk, high reward market strategy for those that know how to invest wisely.