03 Dec Bullish on Bitcoin?
I want to begin by saying that these are all my opinion and I hope that you do some due dilligence before investing in anything. With that said, as of this post, cryptocurrency particularly Bitcoin and Ethereum have recently made some headways and broke their all time highs. cryptocurrencies unlike currencies are digital assets as I'll briefly discuss below. These are high level overview based on my personal understanding on how cryptos works.
What is Bitcoin?
Bitcoin is a form of cryptocurrency. Unlike the traditional form of currency, it's decentralized and there's multiple computers that are participating in the system to hold the ledger which is known as the blockchain. Bitcoin being digital means that there's no physical asset that you can hold unlike gold, money, etc. It's not controlled via one entity like government or the central bank where currency and other non-digital asset records are kept.
Cryptocurrency is essentially a new medium of exchange that can be used to make purchases, and there's a growing number of merchants that are now accepting this new type of currency. The ownership of crypto is recorded in a database that is decentralized and saved in thousands of computers which prevents it from being tampered with. This means that transaction records are secure including records of transfers and ownership.
Dollars vs Bitcoins
Just to do a comparison, I'll go over how dollars are created in contrast to Bitcoins. With dollars, you trust the central bank as the single entity to keep track of possession and transactions which is different from the decentralized approach. Money is created by the entity or government body specifically by the U.S. Department of Treasury. A dollar bill is created using a special type of paper and is designed so it can't be reproduced and is improved over time as technology improves.
With Bitcoin, each one is created by a powerful computer that is set up to do mining. This process can take many years just to produce one and it takes a great amount of power just to maintain the processing including electricity cost, etc. In contrast with dollars, it's hard to reproduce, fake or tamper Bitcoins which is possible with dollar bills. Since it's decentralized, we don't have to rely on one entity to track of transactions since ownership is publicly available.
Since Bitcoins are decentralized, multiple block chains constitutes and holds the records of ownership. These are encrypted and are hashed in some fashion to prevent it from being tampered with. I'm not going to go deep dive about the encryption part of it but involves hashing and using encryption algorithm to keep the ledger secured. The blockchain also provides the low level validity for the cryptocurrency coins using the same hashing algorithm.
Who accepts cryptocurrency?
As of this writing, most people trade Cryptos instead of using it directly to make payments. There's a growing number of companies that are starting to accept Bitcoins specifically as payment including Microsoft, Subway, AT&T, etc. This number will grow over time as more people invests and buy into more cryptocurrencies. There's also a few numbers of merchants and servie providers that have stopped accepting Bitcoins, so that's something to keep in mind as well.
The value of cryptocurrency changes on a daily basis similar to dollars and there's the unknowns of only being around for a decade. This form of currency is new and people remain skeptical as to how digital currency will pan out without the Government backing.
Am I bullish on cryptos?
I'm personally on the fence on it although I've invested a small amount of money into it to further diversify my portfolio. I still think that it has a huge potential since we now live in a digital age where there's less people holding physical assets like cash. There's a downside where the value of your holdings can lose value in a short period of time due to its volatility. Bitcoin rallied to $19K towards late 2017 and within a couple of months dropped to $3K. The crazy up/down swings is not for everyone and I personally would hold on purchasing Bitcoin until it goes back down to $10K and slowly buy into it.
I currently see it as a speculative investment and I would advise anyone to not buy into the hype and get too greedy. Similar to the stock market, a correction will occur at some point and there will be plenty of buying opportunities in the near future. We have enough data on hand to determine when to buy or sell, it's just a matter of being patient and always be ready when the right opportunity comes.
Hope that helps! If you would like to trade Bitcoin and open an account, please use my referral link to earn $10.