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5 things you need to know before buying bitcoins

Bitcoin is the most talked-about cryptocurrency in the world right now. However, most people are still in the dark when it comes to knowing the details.

What is Bitcoin?

Bitcoin is the new-age currency. It is completely a digital form of currency and it allows the users a certain amount of anonymity. The reason it is gaining traction is that it is a secure and global currency.

Most people find it hard to believe that a single Bitcoin could be worth hundreds of dollars. It is true nonetheless. Bitcoins are scarce and finite (21 million to be accurate!). Thus, as time goes on, it will get much harder to mine them, the major reason why they are valued at such high prices.

The best feature of Bitcoin is that it can be transferred anywhere in the world with a very low fee. As there is no governing body, it is independent of corporate monopoly.

It’s not rocket science!

If you are new to the concept of cryptocurrency, investing in Bitcoins might seem a bit scary to you. Fret not. There are sites like www.top10bitcoinrobots.com to help you get a hold over the concept. Additionally, this guide will enlighten you with 5 most important determinants that you need to consider before buying Bitcoins:

Look into the legality of Bitcoins in your country

If you are thinking of investing in Bitcoins, the first thing you need to do is to check if they are legal in your country

There is no governing body in charge of Bitcoins. Thus, most governments condemn Bitcoin. Also, if more and more people start using Bitcoins, the value of the fiat currency will decrease.

This is the reason why many countries across the world have placed a ban on the use of Bitcoin and other cryptocurrencies. If such a thing happens, financial institutions will become useless and the power of the government will be significantly reduced.

It is very important to know if using Bitcoin is legal in your country before you invest in it. Otherwise, you will be inviting strict legal actions that can even land you behind the bars.

Here is a report on the legal and policy landscapes surrounding the cryptocurrencies of 130 countries in the world.

How do Bitcoins work?

It is definitely a bit difficult to wrap your head around the concept of Bitcoin, that is unless you are a tech genius. Most people refrain from investing in Bitcoins because they consider the process to be too complicated. However, if you try to understand the basics, you will realize that the process is not that difficult to comprehend.

To explain it in simple terms, Bitcoin works on blockchain technology. Blockchain is a shared public record that contains any confirmed Bitcoin transactions, including the addition of new Bitcoins.

Whenever a user initiates a transaction, that is, sends or receives Bitcoins, it gets verified using blockchains. Blockchains are like the physical ledgers maintained by financial institutions. The only difference is that they are maintained by the public and anyone with access to them can match a transaction.

The blockchain process helps prevent stealing and double-spending. It also helps the user to develop trust in the system.  

Bitcoin is extremely volatile

The price of Bitcoins changes every hour. In fact, there could be a difference of about 15%-30% at different points during the course of a single day. The price is influenced by a number of market factors.

The primary influencing factor is the supply and demand chain. In simple words, if the demand for buying Bitcoins increases, the price of Bitcoins will also increase. It also acts the other way around, that is, if there are more people willing to sell off their Bitcoins, the price will drop vigorously.

It is extremely difficult to predict the price of Bitcoins. Owing to this unpredictability, it becomes very risky to invest in them. Thus, don’t invest unless you have thorough knowledge about the operations of cryptos. It has the power to push you in the drain in milliseconds.

Bitcoin is not regulated by any agency. Its stocks are not traded on Wall Street. The price is thus, unregulated and fluctuates constantly. If you are risk-averse by nature, you will probably find it a lot safer to go the traditional route when it comes to investments.

You might have heard otherwise, but Bitcoin is NOT anonymous

When it comes to Bitcoin, people have filled their minds with various theories related to its workings and nature. The most common misconception among these is the assumption that one can transfer money through Bitcoins anonymously. However, the reality is quite contrary.

Anyone with access to the blockchains can view any transaction that has been conducted via Bitcoins. Your public address is thus, visible to anyone with the internet. Every transaction you make, including your current account balance is visible on the Blockchain website.

Bitcoin transactions are transmitted randomly over peer-to-peer networks making them seemingly anonymous. Anyone who can connect the various nodes and match the public address to your name can track the transaction to you.

There is not even a hint of anonymity when conducting transactions via Bitcoins. If you wish to make anonymous transactions, you will have to look for alternative cryptocurrencies like Dashcoin.

Learn about securing your Bitcoins

Just like every other valuable item, Bitcoins attract a horde of hackers and scammers. Protecting your Bitcoins from these miscreants is necessary if you do not want to lose tons of money. Learning about how you can secure your Bitcoins is of extreme importance because if you lose the Bitcoins in your wallet, they are gone forever. There is no way of getting them back.

If you are investing a serious amount into Bitcoins, make sure that you use reputable online wallets that are built with utmost security like CoinBase. Bitcoins should only be kept in wallets that you can control completely.

Even using a reputed online wallet is not enough. You need to ensure that your wallet is backed up in case something happens.

The best way to secure Bitcoins is to store them in a hardware wallet. A hardware wallet will secure your private keys on a dedicated and secure hardware device. This will ensure that your wallet is secure from hackers who could use malicious software to corrupt your files. The best hardware wallet available right now are Trezor and Ledger Nano X.  

Follow these 5 points and I am sure it will take you a long way with Bitcoins! All the best!

Author

  • Editorial Director of the The Fintech Times

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