In recent months, Bitcoin has taken the world by storm. Nobody saw it coming, however, many are beginning to embrace what is now called Internet Banking.
What Is Bitcoin?
Some of you might be wondering, what on earth is this coin? Bitcoin is actually a form of cryptocurrency that doesn’t exist in a physical form. You can’t see it or touch it. When you own a bitcoin, it means what you really have is a collective agreement amongst all the computers in the Bitcoin network.
For this to happen, there has to be a ‘miner’. This miner is a person who passes the Bitcoins to you through a series of legitimate transactions. A miner invests a considerable amount of money on computers.
So, in simple terms, if you want to safely buy Bitcoin in the cryptocurrency market, you either must become a miner, or you buy the bitcoins from a miner using conventional cash through a bitcoin exchange. Bitcoin trading has decentralized the world network of computers into one store.
This has a chance to put some bank tellers out of work. You don’t need to visit a bank in order to make a transaction on Bitcoin. You simply exchange the Bitcoins. Because of this, there have been calls to regulate this form of cryptocurrency. Just like any other market, the cryptocurrency market is dynamic. It continues to change.
This leaves us with one question, what important tips should we consider before venturing into the Bitcoin market?
1. Bitcoin Is Untraceable
There are proponents in some journals who think that the Bitcoin ledger is traceable. However, this is not necessarily the case. First, the Bitcoin is not controlled by banks, the government cannot source any information on bitcoin transactions or the owner’s details simply because it is not linked to local banks.
This is why it has a reputation in the black market. Hackers demand to be paid in bitcoins before releasing hacked information and hostages.
Bitcoin public ledgers are stored in a blockchain. You can only see that the bitcoin is associated with a number, but you cannot know who owns that particular number.
2. Bitcoin Trading Is Not Free
When you hear that you can’t go into the banks any more etc. you tend to think that you can buy, transfer and even sell bitcoin for free. Bitcoin is a form of business, and every business has two financial outcomes. It is either you profit from it, or you incur a loss. Bitcoin, as a form of cryptocurrency, has a small fee whenever you transact.
This is a small fee that motivates the miners, to add your transaction to the blockchain. The tip varies with the size of the transaction. The tip is usually $1.6, although it varies since the market is dynamic. In essence, the faster your transaction, the bigger the tip to miners. Anytime you make a withdrawal or exchange, there must be a tip.
3. Bitcoin Is Very Volatile
Just like investing in the stock exchange, the shares can increase and decrease depending on other factors. Major factors causing the volatility of the bitcoin are exchange collapses and hacks. These factors can cause bitcoin prices to plummet or rocket. This is why bitcoin prices fluctuate more than other currencies in the markets, though the fluctuations are not that high.
This is common in any market as these factors causing the price fluctuation are not limited to the bitcoin market. One of the market sources states that the dollar price of bitcoin is 4.2%, according to the Volatility index of Bitcoin.
If you are looking to invest in bitcoin, it is important that you research the market throughly before getting involved. Use the above-mentioned tips as a base of knowledge before you enter the bitcoin market.