Investing in Bitcoin

What are the joys of Bitcoin and what exactly is it? In essence it is a currency that you trade but don’t hold, a virtual currency without regulation and without intermediaries which allows transactions between users that are direct and anonymous. What are its advantages? Costs of transactions are low, there is a record of the amount and the times of each transaction and no one need know who you are!

100% Virtual & 100% Independent

Bitcoin is the only currency in the world that is both 100% virtual and 100% independent. No central bank anywhere has Bitcoin under its control. Everything to do with Bitcoin happens in the virtual world where a process known quaintly as “mining” is responsible for the creation of new bitcoins. In this mining process, it takes complicated computer “brains” finding the solution for problematic mathematical questions to put out a new block of Bitcoins.

Unregulated

However not everything in the Bitcoin garden is rosy. Whatever you may think about the dollar, the euro, the peso or the yen they are the products, the children, the responsibility of democratic duly elected Governments. In contrast to this the Bitcoin is not backed or regulated by any such entity nor is it based on a tangible element – there are no gold standards in the Bitcoin world. Now any Forex trader worth his salt will agree that any currency is only worth what others are willing to pay for it – hence the rapid decline at unexpected events such as the pound immediately after the Brexit result – this is even more so with Bitcoins because lacking any regulation a bitcoin is exactly worth what someone is prepared to cough up!

Trading Bitcoin

How then do you trade in Bitcoins? You won’t be able to do it in the Bourse, Wall Street or the London Stock Exchange nor through your friendly local brokerage. What you have to do is set up a Bitcoin wallet which is a kind of bank account but only for Bitcoins. Once you have that, you can set up a conventional bank account in your local currency in order to buy and sell Bitcoins.

This is not the easiest of processes which means that Bitcoins are not as liquid as conventional currency and that makes for quite violent swings in the value of this virtual currency. For example just one recent month saw a marked variation in the value of the currency going down from $2,500 to below $2,000 and then rallying to over $3,400. This is after all is a relatively new currency and is open to fraud and theft because not all trading is on the “straight and narrow”.

Does it therefore make sense to trade in Bitcoins? If advice to any currency trader would be to be careful, when applied to Bitcoin one should add several extra degrees of caution. No one really knows where the price of Bitcoins may be going – they could be heading for a fall of massive proportions – so don’t gamble on anything that you can’t truly afford.