Bitcoin is a digital currency which is gaining in popularity all over the world.  It was designed by Satoshi Nakamoto in 2009.  Its rise from obscurity to prominence has been spectacular.  Initially, it was very difficult to use bitcoins for conducting day to day transactions of value, however, all this has changed.   

Why invest in bitcoins

It is a new form of digital currency which is decentralised and is not controlled by any single entity.  No central bank or government around the world can increase or decrease the amount of bitcoins in circulation.  It cannot be printed, unlike conventional currencies.

Investing in bitcoins is anonymous and private.  It is not affected by inflation. It has very low transaction fees, transferring money anywhere in the world can be done in a matter of few minutes.

Who else is investing in bitcoins

In its initial days, bitcoins found it very hard to receive any funding.  Over the years, this has changed considerably with many venture capitalists joining hands to fund bitcoins.  According to Coindesk, investment in Bitcoins by venture capitalist firms increased from $95 million in 2013 to $361 million in 2014 and has already crossed $405 million in 2015.  This shows the popularity among large investors.  This also gives confidence that bitcoins are here to stay.

How to buy bitcoins

In its infancy, it was comparatively easy to mine bitcoins using a high-end computer and mathematical formulas.  As many investors have joined the mining bandwagon, it has become increasingly difficult to mine bitcoins.  Very high-end hardware and software are required to mine bitcoins, which is not possible by the individual investor.

The other simpler method of investing in bitcoin is to buy with your cash, credit card, debit card, wire transfers or even by other cryptocurrency. You can buy it from any of the bitcoin exchanges or can purchase  from other people in offline marketplaces.  Some famous bitcoin exchanges are Coinbase, Bitfinex, Bitstamp, BTC-e, Kraken, Huobi, Coinsetter to name a few.

If you don’t like to go through the hassles of buying and keeping digital bitcoins, you can also invest in a trust which invests and safely holds bitcoins for you.  Bitcoin investment trust has commenced operations and The Winklevoss ETF by the Winklevoss twins of Facebook fame is expected to be launched soon.  Many more such funds will be in the fray after the success of bitcoins.    

How to keep your bitcoins

After your purchase, the next important aspect is to store it.  Like a bank where you keep your traditional currency, you will need a wallet to store your bitcoins.  Depending on the level of security you need, your wallet can be as simple as an everyday user account similar to a leather wallet in your pocket or can be a military grade protected wallet.

A desktop wallet can be stored on the hard drive of your PC, mobile wallet can be handy when you go to a coffee shop, online wallets where your bitcoins are controlled by the website and can be accessed from anywhere in the world, some companies also offer hardware wallets and the most popular and cheapest is a paper wallet.

What can you buy with your bitcoins

You can buy almost anything with your bitcoins with more and more merchants accepting bitcoins as a mode of payment for their goods and services.  Some of the famous merchants who accept bitcoins are Microsoft, Dell, Newegg, Monoprix, TigerDirect, CheapAir.com, AirBaltic and many more such reputed companies.  Even mom and pop stores have come forward to accept bitcoins.  It is rumoured that the total number of merchants has increased to 100000 and is growing by the day.

What is the price of bitcoin

A single bitcoin quoted at $0.06 in July 2010 which went up to $979 in December 2013. The fall is equally nerve-wracking as the quote of bitcoin is $231 on 15 September  2015.

Risks of investing in bitcoin

As bitcoin is a parallel to government currency and can be used for black market transactions, a few governments have banned them.  There is a security risk in keeping the digital currency.  In 2014 Mt.Gox the biggest bitcoin exchange filed for bankruptcy after half a billion dollars worth of bitcoins were stolen. There is no insurance for your bitcoins, you will not get anything in return if you lose your bitcoins.  Speculation is rife in the bitcoin markets, the risk are many folds compared to other forms of investments.

Conclusion

Do you enjoy roller coaster rides?Do you live your life on the edge and like that adrenaline rush? If ‘Yes’ then you should invest in Bitcoins.

Young affluent investors can explore options of investing in bitcoins in small amounts not more than 2% of their total portfolio. Anything more can be too risky and lead to severe losses. Bitcoins are still in its infancy, its future is unknown. Investing in bitcoins is not for the faint hearted.

Leave a Reply

Your email address will not be published. Required fields are marked *