Frugal Lifestyle Guide 1

Understanding the Basics of Bitcoin

Is Bitcoin worth investing in? Is Bitcoin the new Gold?

Cryptocurrency has been in the news a lot recently, especially Bitcoin. Just recently a new currency Dogocoin was created “as a joke” and within a week became worth $1bn. Many people are skeptical of a currency that isn’t “legitimate” by banking standards, after all, there is no “Bank of Bitcoin” to guarantee the money. But, despite that, a single Bitcoin is now worth $13-15,000 when just last year it was barely $1000. This has many people wondering if it’s an investment worth contemplating.

Buying and Holding

The most common “investment” for Bitcoin is simply to buy some and watch, much like people would invest in the stock market. Just like the stock market you have to decide when the time to buy is and when the time to sell might be. You’re essentially “gambling” that the Bitcoins will appreciate within a certain period.

The difficulty with this is that you may lose everything. There’s no guarantees that that same $14k price hike won’t be reversed tomorrow and you’ll lose thousands if you try and sell.

Tips on Buying

If you’re going to invest, start by buying only a small amount at a time. This will minimize your losses and stop you from having buyers remorse if the stock drops lower when you next decide to buy. It will average your price so you can make a clearer estimate on your profits. Make sure you set yourself a limit on the amount of time you’re going to invest e.g over a year, over 6 months etc.

Next, you’ll want to make sure you move the Bitcoins into your personal wallet rather than leaving them at the exchange. This protects them and stops anyone hacking them. Secure digital wallets come in various designs like those offered at TREZOR.

Mining Bitcoins

These are often scams, sites that promise to “mine” Bitcoins and increase your investment. This requires specialized equipment and a lot of electricity to run them. It’s usually not worth it for the average investor since it needs to be done large scale. Even if they’re not a scam, the actual return is usually not worth the investment. It can be quite complex to understand how mining works, which is why it’s enticing for beginners since it seems like a way to make money without trying.

Should You?

Investing in Bitcoin is like any other investment – there are risks. You have to decide if it’s too risky and how much you’re willing to lose personally on a currency that could be worth double or nothing by this time tomorrow.

Posted in: Tips

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