While there’s no way to predict the future, especially with any investment, bitcoin and other cryptocurrencies have captured imaginations and changed how many people think about money. Here’s what you should know about bitcoin, so that you can decide whether it belongs to your portfolio or not.
What is bitcoin?
Bitcoin is the first known cryptocurrency. It is an automated currency based on the technology of blockchain. The idea behind blockchain technology is that it offers a public ledger for all transactions, making them transparent and verifiable. Additionally, when bitcoin was first introduced, the payment processing time was rapid, making it a fast and cheap way to send money to people worldwide — without the need for currency exchange rates or steep wire transfer fees.
It is crucial to note that the government does not back bitcoin. Additionally, the network is decentralized, meaning no 55 entity controls it. The concept behind the blockchain technology was introduced in an anonymous whitepaper mentioning the name Satoshi Nakamoto. No one is aware whether this is one person or a group of people.
Bitcoin can be used as a medium of exchange, meaning you can use it to pay for goods and services as long as the other person accepts it. Additionally, there are exchanges where you can trade your bitcoins for fiat currency, such as British pounds, euros, or U.S. dollars.
Since its inception, other cryptocurrencies have been developed using different blockchain approaches and digital protocols. These include blockchains like Ethereum, which have more use cases for smart contracts and decentralized financial applications. Additionally, other networks are faster than bitcoin.
However, bitcoin remains the most well-known cryptocurrency and has the highest price relative to fiat currencies. Due to its relatively high cost, some investors view bitcoin as a store of digital value, similar to gold.
When attempting to answer the question, “What if I invest $100 in bitcoin today?” it helps to understand the history of bitcoin and why it’s considered the most valuable cryptocurrency — even if it isn’t the most useful or efficient.
How to Invest in Bitcoin?
So, what exactly happens if I invest $100 in bitcoin today? Well, first, you need to learn how to invest in bitcoin.
1. Get a Bitcoin Wallet
To accept bitcoin and hold it, you need to have a digital wallet compatible with bitcoin, and there are different types of wallets.
Some are online wallets, connected to the internet. You can usually find these at major exchanges like Coinbase or Gemini. Other wallets are software wallets like MetaMask that can be connected to your browser and are compatible with several cryptocurrencies. Finally, there are cold wallets, which are kept offline. These often look like flash drives.
No matter what type of wallet you get, make sure that it’s compatible with bitcoin or other cryptocurrencies you’re interested in. Many wallets can be used with more than one primary cryptocurrency.
2. Obtaining Bitcoins for Investment
Before you begin looking for bitcoins, make sure you know the address of your digital wallet. The address will look at a string of numbers and letters. Even if you have a hot wallet connected to an exchange, you’ll have a unique address that you can receive bitcoins at.
Once you have your wallet and know the address, you can start investing in bitcoin. There are different methods of gaining bitcoins and using them as part of your portfolio:
- Mining: Rather than buying bitcoins, you can mine them. The blockchain is powered by computers solving complex problems. If you lend your computing power to solving the equations, you receive bitcoin in return. However, you need to buy powerful graphics cards to hope to solve the puzzles and be awarded bitcoin.
- Accept bitcoin from others: If you provide goods or services, you can accept bitcoin in payment. It’s possible to receive a fraction of a bitcoin, so you can give different service levels to receive the bitcoin. Have them send the bitcoin to your wallet and keep it, hoping it will grow in value.
- Buy from an exchange: One of the easiest ways to find out what happens if I invest $100 in bitcoin today is to purchase from a business. Significant businesses like Coinbase, Gemini, Kraken and Binance all accept fiat currency as payment, and you can buy as much as you want. It’s also relatively easy to convert your bitcoin back to fiat currency and withdraw funds.
3. Manage Your Portfolio
When asking yourself, “What if I invest $100 in bitcoin today?” Remember that this is a relatively small amount; depending on when you buy, $100 might only be worth a fraction of a bitcoin. So, you might need to invest more over time to see more significant gains.
It’s also important to understand that bitcoin is part of a new asset class, and it’s far from certain that it will catch on and become mainstream. You can invest $100 in bitcoin today, and it might grow to provide a considerable return later. On the other hand, if cryptocurrencies don’t catch on, or if technology moves beyond bitcoin, you could lose your money.
Carefully pay attention to your overall portfolio construction and avoid risking money you can’t lose.
The best way to find out what happens if I invest $100 in bitcoin today is to give it a try. However, you need to carefully consider your risk tolerance and portfolio goals before moving forward. Penny Calling Penny Partners can help you evaluate your situation and decide where bitcoin and other cryptocurrencies might fit into your investing strategy.