Bitcoin has exploded in popularity and is now one of the most talked-about topics on the internet. It’s easy to see why: Bitcoin doesn’t rely on a centralized institution like a bank and instead offers anonymity and security as benefits for using it.
But what exactly is Bitcoin? And how does bitcoin work? In this blog post, we will discuss everything you need to know about it!
What is Bitcoin?
Bitcoin was created in 2008 by an unknown person who goes by the pseudonym, Satoshi Nakamoto. It allows people to bypass banks and traditional payment methods for goods or services.
Transactions are recorded on a blockchain, which acts as a public ledger of transactions that have occurred within the network since its beginning in 2009. All transactions must be confirmed through this public database before being verified and completed.
The blockchain relies on individuals called “miners” using high-powered computers to confirm these transactions with bitcoin offered as a reward. There are currently more than 18 million bitcoin in circulation across many different countries around the world!
How does it work?
Well… If you want to get started buying your first bitcoin, you’ll need to use an online cryptocurrency exchange. Some of the most popular exchanges are Coinbase, Kraken, BitStamp, and GDAX to name a few.
Like any investment or transaction you make with your money, bitcoin is vulnerable to market fluctuations. This means that if enough people invest in bitcoin at once it can go up drastically – but also down just as fast! That’s why it’s good practice for new investors to only purchase small amounts until they understand how bitcoin works (or cryptocurrencies work as a whole).
Bitcoin Investing
It’s also worth noting that, because crypto trading is so volatile, it’s extremely difficult to maintain a portfolio balance to protect yourself from downside risk. In traditional share trading, investors in high-risk or speculative stocks can also buy more stable “blue chip” equities that tend to retain their value for longer. Altcoins’ values are tied to bitcoin such that when the bitcoin price changes, they generally rise or fall.
To put it another way, the value of altcoins would be more susceptible to bitcoin’s downturn if they are all utilizing the same technology. As a result, if bitcoin has a significant drop, the value of altcoins will generally decrease, even more, leaving coin owners with little opportunity to build a “balanced portfolio” by selling some coins to counteract the overall market trend.
Is it online gambling?
Many of the traits associated with crypto trading have led certain analysts to compare it to online gambling. Indeed, similar concerns have been voiced about day-trading of equities, which is seen to involve a significant amount of luck or chance, erratic results, and an increased risk of poor returns for most investors.
The key distinction between day trading and long-term share investment is that the event frequency (the time between purchase and sale) is typically brief. Purchases and sales may also be more influenced by “technical analysis” than stock appreciation or long-term value.
Day traders, like race and sports bettors, study “candles”, patterns, or ratios and support levels to learn how to make successful trading decisions. While these indicators might often prove useful guides to price shifts, they frequently rely on anecdotal judgments (the price has already risen or fallen) that are unable to anticipate market changes.
As a result, it is estimated that the majority of coin and day traders do not achieve returns higher than the market and that many lose money. Only 7% of stock day-traders are expected to survive five years in the business.
