Bitcoin made some of the mainstream press when it peaked at nearly twenty thousand dollars. It is less publicized now but keeps a significant rating. Should we challenge it or invest in bitcoin?
What is bitcoin?
Bitcoin is a cryptocurrency and even the first of its kind. This neologism refers to currencies intended for exchanges, especially on the internet, which is not issued by states.
The value of a conventional currency depends on the trust in the state that emits it. The currencies of the big countries (the dollar for the United States, the euro for the European Union) are relatively stable. On the other hand, that of small countries with an uncertain future can be devalued very quickly – it is the case for example of Venezuelan bolivar today.
Cryptocurrencies are however independent of states. Their value depends on whether they are used by Internet users, whether they use it to buy goods or simply to place. It fluctuates according to this subjective attraction.
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How are bitcoins issued?
Bitcoin was created by a certain Satoshi Nakamoto: we still do not know who is behind this pseudonym! The anonymity of its creator does not prevent this cryptocurrency from flourishing: the bitcoins are indeed guaranteed by a forgery computer system (called blockchain).
The algorithm defining cryptocurrency caps the number of bitcoins to twenty-one million, which creates a scarcity effect. Bitcoins are distributed over time to computers performing the complex blockchain calculations, which ensure the inviolability of this cryptocurrency.
How to get bitcoins?
The first solution for getting bitcoins is to participate in blockchain certification calculations. This is to provide the computing power (one or computers …), to eventually be the one who gets the new bitcoins. Mining, since this is the current term, now requires considerable computing power … and in practice, the cost of electricity used is often higher than the return obtained! It is now almost a preserve of companies in countries where energy costs are low (especially in Iceland, using low-cost electricity produced by geothermal energy).
The second solution and the most accessible for an individual is to buy them on a platform: there is no centralized exchange for bitcoin, but instead, several platforms are available to buy and sell the various cryptocurrencies. It is obviously necessary to learn about the reliability of the platform that we will use!
Is bitcoin a good investment?
The question remains largely debated … The bitcoin is worth about seven thousand dollars, about one-third of its historical high. This level of valuation is still seven times higher than it was before the start of the flight! The pessimists argue that the fall is only at its beginning, while optimists think it preludes to its rebound …
The opponents of bitcoin point out that cryptocurrencies are not based on anything concrete, apart from a computer algorithm. There would be no reason why Bitcoin would be worth anything: they compare the boom of cryptocurrencies to speculation on the tulip in Holland in the 17th century and anticipate their disappearance pure and simple. They also point out that the energy cost of mining may become untenable in a world of limited resources.
Proponents of bitcoin argue instead that cryptocurrencies are only one exchange asset among others. Gold, for example, has a much higher value than would simply be justified by its economic necessity: it is worth the price that buyers are willing to pay to have an asset that is easily liquid able anywhere in the world and not subject to the arbitrariness of this or that government. Bitcoin is only a technological variant of old-world refuge values, guaranteed by its scarcity effect (thanks to the emission limit).
Should we invest in bitcoin?
Everyone’s arguments stand … and it is very difficult to have a clear vision of the future of cryptocurrency. Some predict a disappearance due a few years while others anticipate a bitcoin to 50 000 dollars in 2022!
The more daring can, therefore, bet on a rebound of bitcoin, with security for a limited investment (investment diversification): the traditional warning banks that a capital loss is possible here is quite justified … The more cautious may remain to booklet A, but remember that because of inflation they will lose 1.5% of their savings each year!