With record low return on investments set to continue, could Bitcoin potentially give massive returns? By Andrew Hurrell
In 2009 I was lucky enough to win a global competition with ‘Marketfeeder.com’. This was an automated software staking system to trade prices in the horse racing market. Since then I have diversified into trading currencies and especially crypto currencies like Bitcoin.
What is Bitcoin and how does it work?
Bitcoin, often described as a cryptocurrency, a ‘virtual’ currency or a ‘digital’ currency – is a type of money that is completely virtual. It’s like an online version of cash. You can use it to buy products and services. Although not many shops accept Bitcoin yet, with PayPal now allowing payments in Bitcoin, as well as the possibility of also purchasing the currency, the future looks bright for the granddaddy of all the digital currency coins. With a limited supply of just 21 million coins available andincredibly low fees for transferring Bitcoin compared to other traditional methods, it may be one day we see Bitcoin replacing virtual credit card payments in Euros etc, with Bitcoin.
How does Bitcoin work?
Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer.
People can send Bitcoins (or part of one) to your digital wallet and you can send Bitcoins to other people.
Every single transaction is recorded in a highly secure network public list called ‘The Blockchain’. This makes it possible to trace the history of Bitcoins to stop people from spending ‘coins’ they do not own, making copies or undoing transactions.
How do people get Bitcoins?
There are three main ways people get Bitcoins:
You can buy Bitcoins using ‘real’ money in most countries (inc Spain) or ‘Fiat’ currency as it is known within the industry on an exchange for which there are many!
You can sell things and let people pay you with Bitcoins.
They can be created using a highly advanced computer techniques.
How are new Bitcoins created?
Special computers are required generate Bitcoins and this is called ‘mining’.
In order for the Bitcoin system to work, people can make their computer process transactions for everybody. This is called ‘Master noding’.
The computers are made to work out incredibly difficult sums. ‘Miners’ of Bitcoins (and other coins) are rewarded with a Bitcoin for the owner to keep. However such is the complexity, you could end up spending more money on electricity for your computer than the Bitcoin would be worth. This in part explains why they are so sought after.
Why does the price of Bitcoin continue to rise?
Like any asset, the price can go down as well as up. However, the total availability of Bitcoins is set at a maximum limit of 21 million coins worldwide. This assures its rarity and its ‘perceived’ value, rather like a rare piece of art work. There are lots of things other than money which we consider valuable, like gold and diamonds. The Aztecs used cocoa beans as money!
Bitcoins are valuable because people are willing to exchange them for real goods and services and even cash.
Why do people want Bitcoins?
Bitcoins are not controlled by the government or banks. Banks have a poor track record of ‘value’ to their customers, since huge amounts of capital invested into banks by private individuals are used to generate the bank’s team of investors a ‘yield’ through different market opportunities. When we deposit a lump sum into a deposit account, the returns are now so low that it actually costs the individual money to store it. This is not just the charges made for transactions and credit cards, but more importantly the ‘inflationary’ aspect of Fiat currency means that over time it becomes less and less valuable in terms of purchasing power.
When I arrived in Spain I could fill my weekly shopping trolley for 50€. Now I can only get a basket for a similar amount!
People can also spend their Bitcoins fairly anonymously. Although all transactions are recorded, nobody would know which ‘account number’ was yours unless you told them.
Is it secure?
Every transaction is recorded publicly so it’s very difficult to copy Bitcoins, make fake ones or spend ones you don’t own. There been ‘hacking’ thefts from websites that let you store your Bitcoins remotely. Although rare, this could occur, so this is why many people choose to keep their private keys of ownership of the Bitcoin safe and offline in a journal and/or a dedicated software wallet designed for this purpose. In this way your Bitcoin is as safe as possible unless you lose both!
In 2009, at inception, Bitcoin was around one dollar per coin. Now (7th Dec 2020) its current price is over 19,000 dollars PER COIN compared to the US dollar. Many big investment banks and Hedge Fund managers, along with private investors, have now realised the potential growth in Bitcoin saying this is just beginning. Many high-ranking billionaires and millionaires see the coin at least doubling in price by the end of 2021.
Robert Kiyosaki, New York Times bestselling author of the book Rich Dad, Poor Dad has been recommending his followers buy gold and Bitcoin. He calls for gold to reach $3,000 an ounce and Bitcoin to reach $75,000 within the next three years. This makes the current price of around $19000 look cheap!
With fiscal stimulus seemingly almost out of control thanks to the pandemic, businesses all over the globe, who are suffering as a result, see the relative safe haven of digital assets ever more attractive as it becomes a major competitor to the usual safe haven of gold, which has fumbled in the wake of Bitcoin’s growth.
As with all my articles, this is for information only since I am neither qualified nor trained in financial advice. It should be incumbent for anyone interested in these kinds of investment opportunities to engage in their own research with advice from a professional advisor like Blacktower Financial prior to investing money into Bitcoin. This is important since with the potential gains, your tax liability on those gains may need to be offset.
Conclusion: Bitcoin Price Forecast and Long-Term Price Predictions
Considering all of the massive price projections and forecasts from industry experts that suggest Bitcoin will someday replace all currencies across the globe, it’s easy to see why so many are bullish on Bitcoin. Price predictions can range from doubling in value to over 1 million per coin over the next few years!
The revolutionary technology has sparked an entire industry aimed at disrupting traditional finance and cryptocurrencies are already well on their way to widespread adoption and regular use by the mainstream public.
Please remember that in line with regulations dictating private investors’ information regarding any investment portfolio, the value of these can go up as well as down and in view of this returns could be less than your original investment.
There are various ways to invest into Bitcoin depending on each individual’s risk profile.
For more information you can email me at email@example.com