Value and investment
People do wonder how and why, what is deemed jokingly as an imaginary form of internet money, has come to become worth so much. A lot of the answers to questions like that come from an understanding of the underlying technology, how it is different and the improvements it makes when compared to modern financial systems. Fundamentally, the actual value assigned to a cryptocurrency is no different than the value assigned to a regular paper currency or commodity like gold. The main difference is to do with the backing. A national currency will be backed by that countries government, be well established and understood by all citizens, whereas a nationless internet based coin is backed by those who have faith in it as a currency, and may have somewhat shaky faith in modern, long withstanding banking institutions.
A lot of these older institutions, businesses and even entire industries have suffered and new ones have prospered as more of the world’s commerce and interactions take place online. With the development of the internet, the rate at which online businesses and services have evolved has dwarfed all other comparable examples of technological progress. The most popular methods of commerce, content delivery and production have been overhauled by the rise of the internet, so it should not be such a surprise to see currencies themselves undergoing the same revolution. Value in Bitcoin comes from faith in Bitcoin, whether it may be the faith from an understanding of the technology or a desire to invest in coins predicted to rise in value. The worth of a coin relies upon the understanding and agreement regarding common currencies, just as paper money is just paper without context and compliance.
Candlestick graphs are used to show the highs and lows of Bitcoin as well as the opening and closing prices.
Most discussions at the moment revolve around how much money you can make by investing in Bitcoin. The answer is a lot of money. Recently the Winklevoss twins made headlines again by becoming the first Bitcoin made billionaires, as the price of a Bitcoin hit $11,500 and the $11million of the $65million pay-out they received from their Facebook lawsuit that they invested into Bitcoin turned into a ten digit number. Although most people won’t be buying millions of dollars worth of Bitcoin, some who have previously been early adopters are now millionaires as a result of the decision to take a risk early on. The early adopters and the relatively late coming millionaires remain alike because of their understanding and confidence in the underlying platform and technology.
Before anyone should consider buying Bitcoin, they should possess a reasonable understanding of the technology and why it is expected to go from strength to strength. It is important to also look at the risks, the long and short-term challenges and even potential alternative cryptocurrencies to Bitcoin. This is important as everyone should be aware of all the information before investing or spending considerable amounts of money, but also because it is the success or failure of the idea and the technology that in the end determines how the value of a particular cryptocurrency changes. Therefore, the best answer to “should I be buying Bitcoin?” is the one that someone arrives at themselves, based on what they understand about it.