Bitcoins are a crypto currency that exists on the blockchain platform. A crypto currency can be considered as a digital currency although technically it isn`t a digital currency, it is a crypto currency. There is a difference between a digital currency and a crypto currency. This isn`t the objective of this article so we won`t go into much detail but a digital currency can be regulated and it doesn’t actually have to be on the blockchain. A crypto currency, exists on the blockchain and cannot be regulated by any central authority. That`s what makes it special.
Bitcoins therefore are a crypto currency, they exist on the blockchain platform which means that they can be traded from anywhere in the world at any given moment in time. Their supply cannot be regulated by any government or central authority which means that their value is based on market forces and the rate at which new bitcoins are added into the system. Eventually bitcoins will be finite in value, which means that they are going to become a very high value crypto asset in the future, very much like gold.
Bitcoins have been in existence for over 12 years and in this period they have passed through multiple litmus tests. They have been tested by value booms and market crashed and most recently they were tested by a global market crash due to the Covid-19 pandemic.
As a result of these tests, Bitcoins have been established as being useful for two main purposes.
- Medium of exchange
- Investment option
As a medium of exchange, bitcoins can be used as a currency to sell and purchase other commodities. As an investment options, bitcoins can be used similar to the shares of a company. The value of bitcoins is very volatile.
Figure 1 shows a 24 hour value graph and it can be seen just how volatile bitcoin is, this volatility allows investors a chance to make profits. Further more if we look a the long term price movement.
Figure 2 shows us the all time price movement of bitcoins, here it can be seen that bitcoin presents investors with an excellent opportunity to invest their funds for a long time, to benefit from the returns being generated by bitcoins.
Therefore both short term and long term investors can use bitcoins to generate returns, if they have got a sound strategy. It must however be understood that bitcoins are a crypto currency and not a stock of any company.
The stock market is a place where the stocks of different companies are traded whereas bitcoin is a crypto currency and it is not traded in a stock market. Bitcoins may behave like stocks but they are a completely different type of asset.
Where Can Bitcoins Be Bought From?
Since bitcoins are a crypto currency, they can only be purchased and sold in a market place where other crypto currencies are traded. There are mainly three ways to buy and sell a crypto currency.
I – Cryptocurrency Exchange
A crypto currency exchange is an online platform that is basically a foreign exchange but for crypto currencies. A crypto exchange allows users to exchange their currencies for bitcoins and vice versa. Crypto exchanges are regulated platforms, which means that they are registered with the governments presiding over their respective jurisdictions. Governments can therefore know who buys and sells bitcoin stock.
A crypto exchange is the safest and most convenient way to purchase bitcoins. There are a lot of crypto exchanges operating in the market right now and some top of the line exchanges include Binance, Coinbase, Cash App, Cex.io and Bisq. There are others as well that you can search for.
Purchasing bitcoins through an exchange is very easy, you will simply have to sign up on the exchange of your choice, connect your payment options such as bank or credit cards and connect your bitcoin wallet. Once done, you can buy and sell your crypto currency using the crypto exchange of your choice. Transactions are usually instantaneous but sometimes they may take a few hours to get cleared.
II – P2P Platforms
Peer to peer platforms are also a very common way of purchasing and selling bitcoins. In fact most of the trading happens on these P2P platforms because they are not regulated and therefore people can feel more free on such platforms but on the other hand the cost on P2P platforms is higher.
A P2P platform is simply a marketplace where buyers and sellers connect with each other and then mutually agree on the details. Usually sellers put up bids of their bitcoins. They advertise their selling rate and quantity and if any buyer likes it, they can finalize the transaction.
The risk of fraud on P2P sites is higher as they are non regulated and the buyers may take the money and never send any bitcoins. For this reason most P2P sites have now got reputation bars where buyers can see the reputation of a seller.
III – Bitcoin ATMs
Bitcoin ATMs are ATMs that dispense bitcoins. In the past one could directly buy bitcoins through an ATM for cash but now regulations are being changed and some bitcoin ATMs require personal identification. Bitcoin ATMs are not a very popular method because these ATM points are limited and thus not very accessible.
Conclusively it can be said that if you are looking forward to crypto trading then you should take time to learn trading strategies. Bitcoin is extremely volatile and while yes this is very lucrative, this can also be disastrous if you get your timing wrong.