4 Questions For The Prospective Bitcoin Investor

by Adam on January 23, 2018

Bitcoin may have crashed back down to Earth a little bit in early 2018, but it’s still one of the most buzzworthy investment assets on the planet. An incredible surge late in 2017 reset the bitcoin conversation, causing some people to compare it to gold, and others to the dot-com bubble. At any rate, a lot of people are considering buying in for the first time. That isn’t necessarily a good or a bad idea – but it’s definitely an idea that requires you to ask a few key questions.

What Is Bitcoin?

We may as well start with the basics, right? The question of what bitcoin is is one we’ve addressed before, but it bears revisiting now that more people tend to look at the cryptocurrency as a commodity than a currency. Bitcoin, technically speaking, is a new form of online currency, created, held, and transferred entirely digitally. As an investment asset, however, you can truly think of it as a digital commodity. The comparisons to gold can be overdone, but in terms of how it’s traded, you can think of it similarly. You basically buy and sell quantities online through secure platforms and based on the latest trends and price movements.

How Is It Stored?

This is a hard thing to explain to people who haven’t held bitcoin before, or at least read about it extensively. A Canadian gaming news platform might have actually done the best job of explaining the process, in the interest of educating people on bitcoin’s utility in gaming. As they put it, you need to get a bitcoin wallet, which is the loose equivalent of a bank account. You can learn about the underlying processes by which bitcoins are electronically stored and transferred, but it’s the bank account idea that’s most helpful. Your electronic wallet protects access that you and you alone have to your bitcoin. Alternatively you can use a hardware or “paper” wallet that stores access codes offline.

How Much Do You Need?

With bitcoin being essentially brand new to many of us, it’s hard to know how exactly to value it. That is to say, it’s difficult to know how much you need to make an investment worthwhile – and the price of bitcoin itself is changing dramatically day by day. The best tip in this regard is to think of bitcoin in dollar amounts (or whatever currency you use). With the best wallet apps, you can input a dollar amount of bitcoin you’d like to buy, and actually buy tiny fractions of a single bitcoin, given that one bitcoin can be well over $10,000. No one can tell you how much you specifically need to make the investment worthwhile – but with the asset so volatile, it’s helpful to think of it in monetary terms.

Where Is Bitcoin Going?

No one can say for sure where bitcoin is going. It’s one of the hottest topics in investments, but also one of the hardest questions to answer. One way to look at it might be to anticipate either extreme. For instance, one analysis said bitcoin could hit $60,000 in 2018, but that another crash is coming. This represents both common interpretations in a single prediction: that bitcoin is in a bubble, and that it still has lucrative potential. Unfortunately, again – no one can tell you for sure.

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