So Bitcoin has rallied and is up 10% so far this week. On the surface, that sounds pretty good. However, bitcoin is capping off an awful year and is down 72 percent year since January.
Let's face it, 2018 has been brutal for cryptocurrency investors. Many people have jumping into the market with dreams or rapid riches, while early investors have taken profits and retrenched. many banks and financial institutions are opening trading desks and incorporating block chain in their strategic vision, so there is reason for optimism. But how should a novice investor view this year of upheaval and plan for the future? We can start by getting back to the basics.
Bitcoins can be quite confusing, so ensure that you truly understand everything before you move forward. Here are eight facts to consider.
1. Bitcoin Is Virtual Money. To have virtual money, you need to have regular money or fiat currency. The money in your billfold today is not backed by anything at all other than a government said it's worth what it is. For example, a $100 US dollar bill is only worth that amount because someone assigned that amount to that paper. With bitcoin, the value is determined by the buyer and the payer, and the bitcoin is created when both agree terms have been met and the so-called miner verifies the transaction.
2. Bitcoin Is Created Via Mining. Miners use software that finds keys that open wallets or padlocks. Basically, they are transactions that are happening between people, and the miner certifies the transaction. Miners create value for cryptocurrencies, but it is very difficult and requires powerful computing power.
3. Bitcoin Has Real Value. Bitcoin isn't fake money. It has real value. The value is determined by the users, both buyers and payers, not an outside entity. There is a protocol that has to be followed and is impossible to change. Many people feel that this is a more democratic, free market approach compared to the fiat currencies back by governments.
4. Bitcoin Lets You Pay Locally and Globally. You can pay in more places than you may think with bitcoin. You can even use bitcoin online at sites like Overstock.com. You may be surprised that some of your local stores are taking bitcoin. You only need to ask. Exciting new companies like YellowCard.io allow you to pay in cash at your local store to buy crypto instantly. No bank account required. They are expanding to 160,000 locations worldwide.
5. No One Has Control Over Bitcoin. Bitcoin isn't run by any person or government entity. There are rules, but the users are the only ones to enforce them. As of now, there are over 17 million bitcoins in circulation.
6. Bitcoin, Unlike the Dollar, Is Limited. There are only 21 million bitcoins and no more will ever be created. The value can go up or down, but there will never be more. This is unlike the American dollar, which the government can choose to print more at any time.
7. You Must File Taxes on Bitcoin. Technically since bitcoin has value, you must claim the dollar value on your taxes in the USA. Nearly 1000 people have done so as of 2017 taxes.
8. Don't Lose Your Wallet. If you aren't careful, you can lose all your bitcoins by not saving your hard drive. You're the only one with proof of your transactions, so you must guard it carefully or you can lose it all. You can use a hardware wallet that stores the user's private keys in a secure hardware device. But most novices use a service like Coinbase.
Using bitcoins without losing your money can be a great way to invest and earn more money. But, before you get started it's imperative that you learn everything you can. You can learn a lot by going to the Bitcoin.org website and reading everything you can about it. Or you can try an online course like the ones reviewed on BitcoinExchangeGuide.com. Also, consider finding a mentor to help you navigate the world of bitcoin.