Hardly a day goes by without a story about Bitcoin or the many other cryptocurrencies featuring on new websites and in newspapers and magazines. Cryptocurrency was once reserved for the highly tech-savvy people among us, but it is becoming increasingly mainstream on a seemingly daily basis. Investing in cryptocurrency has never been easier, but there are several positives and negatives regarding doing so. This guide will highlight the pros and cons of cryptocurrency investment and how to do it.
More than 20 major companies accept Bitcoin as a payment method, showing that the world’s biggest and most popular cryptocurrency is here to stay. Wikipedia accepts donations in Bitcoin, while Microsoft customers can top up their accounts with Bitcoin. Other top brands accepting cryptocurrency include Virgin Galactic, AMC, and Twitch, while the NFL’s Miami Dolphins are said to be allowing fans to purchase tickets with cryptocurrencies.
Hundreds of online casinos and sportsbooks accept wagers in cryptocurrency, but this is not a guide on how to bet with Bitcoin; it is about your options should you choose to invest in crypto and how to do it. Be warned, cryptocurrency investment is not for everyone because it is a highly volatile asset, many more times than traditional funds, shares, and stocks that most people invest in.
The Massive Peaks and Troughs of Bitcoin’s Value
Bitcoin had zero value when it launched in 2009, but its price rose to $0.09 by July 17, 2010; its value hit $1 on April 13, 2011. Only three months later, a single Bitcoin cost $29.60. The price then fell to around $2 by November before it embarked on a meteoric rise over the next few years. By December 15, 2016, Bitcoin exchanged hands at almost $19,350. More huge peaks and troughs occurred before Bitcoin broke through the $83,700 barrier in November 2021. However, its value has been in decline since and is currently trading at around $23,900. Investing in Bitcoin is not for the fainthearted.
Bitcoin Investment Options
There are several options available to potential cryptocurrency investors. The most popular way is to buy it directly, store it, and wait for the price to increase before selling it. You buy Bitcoin and other currencies via a cryptocurrency exchange, of which there are many. You make a deposit with traditional money and exchange it for the cryptocurrency of your choice. The cryptocurrency is then stored in a digital wallet on the exchange, via an independent wallet provider, or in a personally held digital wallet. Make sure you thoroughly research the exchange you plan using just as you would if you were purchasing stocks and shares.
Buying and holding any cryptocurrency is a high-risk endeavor because of the asset’s volatility, which makes investing in it not for everyone. Instead of buying Bitcoin directly, another available option is to invest in companies with a partial or total focus on the cryptocurrency world, giving you some exposure to the market. PayPal Holdings Inc. supports several cryptocurrencies, as does Robinhood Markets Inc. Other companies mine (that is produce) cryptocurrency, and others provide mining hardware, and you can invest in those companies. Some legitimate companies, such as MicroStrategy Inc., hold large amounts of cryptocurrency on their balance sheets.
Mine Your Own Crypto Assets
With some technological know-how, it is possible to become a cryptocurrency miner or validator. Miners use high-end computers with powerful graphics cards to solve complex algorithms, yielding cryptocurrency as a reward. Validators are responsible for verifying freshly mined cryptocurrency and ensuring it is added to the blockchain network. Again, this requires much computer processing power.
Mining and validating cryptocurrency, although made much simpler recently, requires an immense amount of electricity and computer equipment. Sky-high start-up costs and ongoing power bills are often prohibitive to potential miners unless they live in a part of the world that has cheap electricity.