If you’ve heard of Bitcoin and other cryptocurrencies, then you’ve probably also heard compelling stories about people who have hit the jackpot by investing in Bitcoin at just the right time. It can offer high returns, but high rewards mean taking high risks. However, investing in Bitcoin is a decision that should be weighed very carefully. Here’s some basic info about Bitcoin, including what it exactly is and why it’s worth so much.
Complications of Investing in Bitcoin
Investing in Bitcoin means claiming the income you made from it on your taxes, which could potentially be a complication for some people. This could be an issue if you haven’t been keeping accurate records about your Bitcoin transactions. The IRS has expanded its efforts to go after those who don’t report their income made from Bitcoin or other cryptos. Bitcoin record-keeping is also entirely your responsibility to maintain.
If you want some more information on the implication of taxes and declaring Bitcoin as income, you can get tips from xCoins, which is a trusted Bitcoin exchange that’s very popular among those who want to invest in Bitcoin. They also offer excellent, easy-to-understand advice about Bitcoin and how to go about investing. If you do want to invest, check out their site, which offers super simple methods for purchasing Bitcoin, making it easy and straightforward to start investing.
What is Bitcoin, and Why is it Worth So Much?
Bitcoin is one of the most efficient and simple ways for trading and transferring money over the internet. To understand why Bitcoin is worth so much, it takes some basic understanding of money’s general characteristics.
These six characteristics include:
- Divisibility
- Durability
- Limited supply
- Portability
- Uniformity
- Acceptability
Bitcoin has a high value because it has those six characteristics and performs well as a currency. The only drawback to using crypto like Bitcoin is that not every merchant accepts it as payment. However, even this is changing more and more companies are changing their policies and beginning to take crypto as a payment method. This even includes major companies like AT&T, Expedia, Microsoft, and Overstock.com, which now accept Bitcoin from their customers as payment. There’s no unlimited source of Bitcoin tokens, either: there’s a finite amount of Bitcoin that can be mined, which also drives the price up. Often, the value of Bitcoin surges simply due to the amount of interest generated in it.
How Do You Mine Bitcoin?
Bitcoin works by a decentralized system that records every transaction in a ledger called a Blockchain. When you mine Bitcoin, you can earn it without paying for it in the traditional sense but you need a mining rig, which is very expensive, often costing up to $10,000. When Bitcoin first came onto the market, it was possible to use a conventional computer for mining. However, today you need an expensive setup to mine Bitcoin. You can use an ordinary computer, but the payoff is minuscule, so nobody does it. It’s simply not worth it.
Bitcoin Mining Involves Solving Complex Mathematical Puzzles
If you want to mine Bitcoin, you also need special hardware designed with the correct algorithms. The mining process works by solving incredibly intricate mathematical problems. Whoever solves the puzzle first adds a block to the Blockchain and earns approximately 6.25 bitcoins (that’s the current number as of November 2020). For some perspective, at the present worth of Bitcoin, 6.25 coins are worth roughly $367,689. You can see why mining Bitcoin is so popular and why so many people consider investing in cryptocurrencies.
However, solving these complex puzzles is no cakewalk; otherwise, everybody would do it. It takes massive amounts of electrical and computational power and software specifically designed for Bitcoin mining. However, with the cost of electricity soaring, you most likely won’t earn enough money to turn a profit, even if you have a top-notch mining rig. That’s why many people are considering investing in Bitcoin by purchasing it, which is much easier.
Also see: How to buy bitcoin in Ghana?
How Can You Buy Bitcoin?
If you’re going to make the leap and invest in Bitcoin, you have to find a suitable exchange for purchasing it. Before you decide to invest in Bitcoin and buy coins, you need a few different things. This includes a crypto exchange account and wallet, a secure internet connection, and obviously, money. You can use just about any electronic payment method: bank accounts, credit cards, and debit cards. Another benefit of using Bitcoin as payment is that it can be used with relative anonymity. Though everybody can see transactions on the Blockchain, there’s no actual identifying information recorded, only your public key.
Is Investing in Bitcoin Worth it?
About a year ago, in 2020, one token of Bitcoin was worth about $5,800. Flash forward to March 2021: it’s currently trading at an all-time high of about $58,827 per coin. That’s a siren song that many can’t resist. However, is investing in Bitcoin the right move for you? The most vital part of considering any investment is to weigh the risks and rewards carefully. Though the value of Bitcoin has often fluctuated dramatically, buying Bitcoin can be a good idea if you have the investing chops, experience, and budget. Not to mention, even when the price of Bitcoin has crashed, the subsequent recovery has consistently surpassed the previous all-time high, which is another enticing point for potential investors. However, that’s not to say that you should rush out and buy Bitcoin. Investing is a personal choice that only you can make. It’s high-risk, but it can bring remarkably high rewards, which is why so many have been considering investing in Bitcoin.
Bitcoin is Becoming More Widely Used Every Day
Another consideration when it comes to investing in Bitcoin is that it’s starting to become more commonplace. More companies are starting to adopt cryptocurrency as an acceptable payment method. The number has steadily increased, particularly since the pandemic has accelerated the number of online transactions that occur every day.
Even businesses are investing in crypto. Its excellent market performance and consistently high values have been noticed by investors and financial analysts worldwide. The most famous example is Tesla’s owner Elon Musk, who notoriously purchased $1.5 billion in Bitcoin in February. It was explained as a “corporate treasury strategy,” and Tesla revealed that they made the massive purchase in the hopes of having more flexibility when it comes to maximizing returns on their cash.
Bitcoin Continues to Rise in Popularity Among Companies and Consumers Alike
Bitcoin and other cryptocurrencies continue to skyrocket in popularity as the numbers of people mining, investing in Bitcoin, and using it as a payment method increase exponentially. The value of Bitcoin has continued to rise and rise, and one single coin is currently worth over $50,000. This has made it an attractive method for investing for many people and companies located all over the globe. Investing in Bitcoin is your personal choice, and only you can make it. It may be a high-risk investment, but that’s the rub: high risks offer even higher rewards. Whether you make the financial decision to invest in Bitcoin or not, it’s clear that cryptocurrency is here to stay.