A man from Jacksonville, Florida, completed the first Bitcoin transaction in the real world in 2010. He spent 10,000 bitcoins on two pizzas. That was a fair price for two pizzas at that time. If this man had missed dinner and retained his bitcoin, he would now have over half a billion dollars in cryptocurrency.
Bitcoin is an excellent investment by historical standards. Bitcoin has gained 31,000 percent in the last decade, making it the best-performing asset. If you had invested $1,000 in Bitcoin ten years ago, you would now be worth millions of dollars. But can Bitcoin keep growing at this rate and is bitcoin gambling legal? Trading volatile cryptocurrencies carry a significantly higher risk than typical investments, but the rewards might be life-changing.
Is Cryptocurrency a Safe Investment?
Blockchain technology underpins Bitcoin and other cryptocurrencies. A blockchain is a decentralized ledger technology that relies on miners to keep track of transactions. Bitcoin’s systems are expected to have 10 to 20-fold the computational power of Google’s servers, making it one of the world’s most secure systems.
To hack a blockchain, you would need to control 51 percent of the network’s miners at the same time, making data breaches nearly difficult. However, crypto exchanges are still vulnerable to hacking, and you are not safe from malicious actors unless you put your crypto in a hardware wallet.
Bitcoin and other cryptocurrencies are costly investments, despite the fact that blockchains are practically impenetrable. In a bear market, Bitcoin can drop by as much as 80% to 90% of its value –– in 2015, Bitcoin lost 84 percent of its value, and in the 2018 bear market, Bitcoin lost roughly 85% of its value. However, as more firms and long-term investors enter the market, volatility will fall dramatically.
The most secure blockchain is Bitcoin’s, followed by Ethereum’s. After that, circumstances get a little more challenging. Smaller networks are simpler targets but intrinsically less secure because security is directly associated with the ability to take over 51 percent of the network. Crypto security is not a one-for-all solution.
Is Cryptocurrency Covered by Insurance?
Investing in crypto, like other assets, is not insured. Some crypto-related investments, however, are covered by insurance. Coincover, for example, provides insurance for cryptocurrency wallets and exchanges. If these businesses use coincover, their customers’ bitcoin is protected against theft and, in some situations, loss of private keys. Your private key is the key that allows you to access your cryptocurrency wallet. Decentralized insurance possibilities based on the blockchain are also available.
Nexus Mutual is a popular decentralized insurance protocol that allows investors to buy into an insurance fund. When investors purchase a share of the fund, they are given Nexus tokens in proportion to their investment. The token price is calculated mechanically based on the fund’s total tokens, the minimum reserve requirement, and the number of open insurance contracts. Nexus Mutual can guarantee a company’s exchanges in the event of a security compromise.
Investing in Cryptocurrency
Many bitcoin investors consider cryptocurrency to be a long-term venture. Some traders vow they will never trade their cryptocurrencies because they expect it will eventually overtake gold and paper currency. On the other hand, cryptocurrencies have experienced multi-year bear markets, with thousands of investors losing 50% or more of their assets. Regardless, Bitcoin has continued to break all-time prominent levels.
On the other hand, some crypto traders consider cryptocurrency as a short-term investment. Some traders would even purchase bitcoin tokens with no intrinsic worth because they believe the price will climb regardless.
Crypto for Short-Term
Traders that invest in crypto for the short term are more concerned with the historical price of the coin than with its utility. Many short-term crypto investors, for example, put their money into Dogecoin, which has no strategic edge over larger cryptocurrencies like Bitcoin. These traders buy Dogecoin because of its high volatility, which allows them to make short-term gains.
Other short-term traders buy Bitcoin amid price spikes to get in early enough to ride off the frenzy. While some traders may profit from this strategy, most people are better off purchasing cryptocurrencies and storing them for the long term.
Crypto for Long-Term
If you believe in the technology behind blockchain, cryptocurrency is an excellent long-term asset. Bitcoin is viewed as a source of liquidity, and others think it will end up replacing gold. Ethereum, the second-largest cryptocurrency by market capitalization, has tremendous long-term growth potential.
If Bitcoin is the internet for cryptocurrency, Ethereum is the internet for computation. Decentralized apps (Dapps) on Ethereum allow anyone to use the cryptocurrency for more complex financial activities, including loans, insurance, and derivatives. Dapps can also be video games – running a game on Ethereum allows players to buy and sell in-game objects via the blockchain.
Make sure you understand what you are investing in before making a long-term bitcoin investment. Determine what problem the cryptocurrency is attempting to solve and determine whether there is a benefit to incorporating blockchain technology into the solution. Although operating on a blockchain provides no competitive advantage, some cryptocurrency companies develop a token to make it easier to obtain funds from unaffiliated investors.
Where to buy Cryptocurrency?
There are a variety of places to invest in cryptocurrencies. For beginners, eToro and Gemini are excellent choices. You can finance these exchanges by visiting their websites or downloading their mobile apps. You can buy cryptocurrency with a debit card, a wire transfer, or other cryptocurrencies on Gemini and eToro.
Robinhood is one of the most convenient ways to buy cryptocurrency, especially if you already have a Robinhood account for trading stocks. Robinhood allows investors to buy major coins like Bitcoin and Ethereum and a few select altcoins but has fewer cryptocurrencies than dedicated crypto platforms. It is worth noting that you cannot yet transfer crypto from Robinhood, so if you want to move your virtual currencies to a hardware wallet or use Defi, you will need to use a separate crypto exchange.
