As the well-known cryptocurrency is dominating the headlines in financial world in recent years, many people are interested to find out more about this anomaly in order to get the answer on the following question: “Should I invest in Bitcoin too?” Bitcoin (BTC) is beginning to seem like very effective and practical currency, especially since reaching the $2,000 mark in early 2017 (1BTC = $2000). Just to remind you, soon after its release, the price of Bitcoin in 2010 was $0.08, meaning that its value rose almost 2000x in 7 years. The current value of BTC is $2450.76 while I am writing this post.
In recent months, Bitcoin is performing better than ever. Since the beginning of 2017, Bitcoin price hit historic highs twice, surpassing even the value of gold. Since its release, there were numerous attempts of creating new, competitive copycat cryptocurrencies, but few of them succeeded. Only Ripple and Ethereum have proved to be good competitors in the cryptocurrency market so far.
There were also some major setbacks in BTC history, such as the loss of $480 mln due to Mt. Gox’s sudden bankrupcy, which caused some real problems for this cryptocurrency in the past. However, each time it was threatened, this first-ever Blockchain currency has climbed back pretty fast.
In order to get involved in Bitcoin industry, you should get to know this cryptocurrecy’s characteristics and its advantages on the modern market. It’s important to know something about BTC compared to fiat currencies, its massive growth and its capability of climbing back after each downfall.
Comparison to normal currencies
Bitcoins can be used to buy items electronically, meaning that it is just like dollars, euros and yen, which are traded digitally as well. However, the most important characteristic of this cryptocurrency, and the thing that makes it different to “normal” currencies, is that bitcoin is decentralized. There is no institution in the world that controls the bitcoin network. The number of bitcoin holders and the overall popularity is constantly increasing because there is not a single large bank that can control people’s money.
Today, there are more than 16 million Bitcoins in circulation worldwide, which is almost 40 billion USD.
Massive growth of Bitcoin
As the most popular digital currency that uses the Blockchain technology, Bitcoin owns the huge share of the emerging market. The trading volume of BTC is way larger than any other competing currency. Its value is many times bigger than the second cryptocurrency on the market, Ethereum (ETC). The recent global adoption and mainstream coverage have made Bitcoin a possible real-world asset, being officially accepted in countries such as Japan, United States, Canada, Sweden, Germany and many more. You would be also surprised to know that there are some areas in countries like Somalia and Afghanistan, where some poor families don’t have access to commercial banking. As Bitcoin is much safer for them, these people choose to receive remittances in BTC.
After some major cases of theft for both Bitcoin and Ethereum, trust in the digital currency seems to be rebounding very quickly. Some experts believe that the cryptocurrency is a bubble which is about to burst, while others claim that contentious political and economic conditions could push the price up even further in the upcoming years.
The fall and recovery of Bitcoin
On May 25 2017, Bitcoin hit a record high of $2700. Since that moment, this digital currency went into a sharp correction, losing almost 30% of its value in just 48 hours, according to the charts on CoinMarketCap. A large number of cryptocurrencies, including Ethereum, Ripple, Litecoin, Dash, and Monero declined at the same time as well.
On May 27, Cryptocurrency users witnessed the bitcoin price going from $2,500 to $2,700 and then suddenly falling to $1,900 in just several days. During these days, there were intense fears of investors toward a short-term bitcoin bubble. However, as many experts predicted, after that $800 fall in price, Bitcoin has recovered pretty fast, reaching the stability at $2,230.
During the last weekend in May, Bitcoin price has increased by around 10 percent in just 24 hours. It was mainly caused by the increase in the demand toward BTC from major exchange markets. Japan and South Korea have maintained their rates throughout bitcoin’s bizarre rally, and the trading volume of the Chinese bitcoin market has largely increased over the last two weeks in May. In just one week, bitcoin price went from $1,700 to $2,700. As it was the case many times before, these short-term bubbles burst after a huge market correction, but the price always stabilizes at a higher point than the price at the start of the rally.
Ways of trading Bitcoin
Bitcoin trading is very similar to traditional stock market trading. There are various exchanges where people can put both cryptocurrencies and fiat currencies in order to exchange them. The most popular exchanges include names such as LocalBitcoins, Kraken, Bitstamp, Coinbase, OKcoin, BTC-e and many more. It is all about market moves, market predictions and price changes. It is very risky, so it can cost you a lot of money, but it can also get you huge amount of it. If you prefer to trade anonymously, it is good to choose exchanges that you find suitable. In the case of LocalBitcoins, it is slightly different. Here, individual Bitcoin buyers and sellers from all over the world can find each other and trade directly, person to person.
For all those who wish to avoid this traditional BTC trading, and try something different, there are several more ways to earn money on the cryptocurrency market. These include margin trading, lending and investing.
There are numerous online platforms that offer trading participants to use third-party peer-to-peer financing from other participants on the platform to trade. This means that users can buy or sell in a digital token market, without owning the token itself. Margin Trading is actually borrowing from the broker (trading platform) in order to buy or sell a stock. Some of the most popular choices of BTC holders include platforms such as Bitfinex, Okcoin and Poloniex.
Peer-to-peer financing mechanism on Bitfinex was one of the first to make this type of trading possible. Bitfinex offers 3.3x leverage, which means that for every $1.00 you have in your account, you can margin trade up to a $3.30 across all available markets. When borrowing funds, interest charges are automatically factored in once your position closed.
– No Margin for U.S. Traders
– Buy or Sell Bitcoin Against USD
– Trade Bitcoin and Altcoins
– Leverage Trade up to 3.3x
– Trade Bitcoin with 20x Leverage
– Bitcoin & Litecoin Futures
– Buy Bitcoin & Litecoin w/ CNY
– Up to 2.5 times leverage
– Majority of altcoins against Bitcoin
– Bitcoin & Litecoin futures
Lending (Margin Funding)
Peer-to-peer bitcoin lending enables all individual investors to access some profitable interest rates. All those who borrow money have a chance to get small business loans quickly, in a simple way. The most popular choices for users are to lend via Poloniex and Bitfinex. Bitfinex and Poloniex leverage Bitcoin as a technology and payment network in order to create the global market for business loans. That’s something that is not possible in the conventional banking system because payment transactions in that system still take too long and are quite expensive.
All these BTC lending platforms are places on which people can borrow from someone and lend to someone Bitcoins. Like in the normal banking, the borrower promises a specific interest rate to the lender for getting the BTC.
Investing can be a very profitable option for all BTC holders. There are some startups that you can invest in, some projects that you can support, or even some companies that are offering you a wide range of projects, according to your interest.
The ICO is an unregulated means by which new cryptocurrency projects can raise funds by selling some newly minted crypto coins on the market. This method is quite common among startups who wish to bypass the complicated and highly regulated capital-raising process. In an ICO campaign, there is a percentage of the cryptocurrency that is sold to the backers of the project. In exchange, they get a legal tender or some other cryptocurrencies. In the majority of cases, it is exchanged for Bitcoins (BTC) or ethers (ETH).
Before starting a campaign, startups generally create a plan which explains what the project is about and what needs the project will fulfill once it’s completed. During the campaign, all interested supporters can buy some amount of the distributed tokens. If the money that is raised doesn’t meet the minimum requirements by the startups, the money has to be returned to the backers. But, you should know that ICOs have offered some huge returns.
On the list below, you can see some of the most successful ICO campaigns that happened recently.
A decentralized platform called “Waves” uses custom crypto tokens in order to represent value. In July 2016, Waves raised 29,634 BTC (US$16 million) in its ICO for 85,000,000 coins.
Gnosis is a startup that builds a platform for prediction markets on Ethereum. In April 2017, Gnosis raised 250,000 ETH (worth US$12.5 million) in less than 15 minutes.
Golem is the decentralized global market for computing power. Near the end of 2016, Golem raised 820,000 ETH (more than US$8.6 million) in half of hour for its Golem Network Token.
Other investing methods
BNKToTheFuture is a good example of a company that helps investors in the digital currency world, connecting them to appealing projects that are in the first stage. The global online investment platform “Bnk To The Future” offers qualifying investors to invest in the project with a huge potential, including FinTech companies. This company intends to provide qualifying investors the opportunity to invest in the companies and products that will be the most important part of the future of finance.
So far, there has been invested more than $150 million on this online investment platform.
– More than 35,000 professional investors took part in investing.
– More than 20 million Bitcoins were invested.
– More than $3,500,000 has already been returned to investors.
Here are some of the most interesting, recent projects that had success in early stage:
Shape Shift “Series A” – Digital asset exchange
The amount raised in this project was €9,551,800 with 39 investors involved.
BitPesa “Series A” – Remittance platform that sends money to East Africa
The amount raised in this project was €2,296,106 with 24 investors involved.
Bitfinex – Trading platform for Bitcoin, Litecoin, and Ether
The amount that was raised in this investment project is €50,067,650 with 97 investors involved.
Should you invest in Bitcoin?
It could be very profitable to invest in a currency that rose up from $0.08 in 2010 to $2400 in 2017. This powerful digital currency can change the world of finances as we know today. It is already enough if we mention that Bitcoin surpassed gold in 2017.