We all have a lot of apprehensions and doubts when it comes to investing in Bitcoins. Let s first understand this virtual currency in detail. Bitcoin is classified as a virtual currency. They do not exist in the physical form like the traditional currency exists in.
But with the changing trend of investments and cash pay-outs, almost every transaction today is digitalized. The exchange of money is mostly through a payment portal, and dealing in cash has reduced tremendously. So almost all the funds we manage are online.
Bitcoin has been on the rise. As a result, the cryptocurrency markets have seen a boom in cryptocurrency prices. As the cryptocurrency value increases, Bitcoin is also set to see a record high and cross its total valuation of $1 trillion. The increase in the price of Bitcoin suggests its acceptance by mainstream investors.
How does Bitcoin Work?
I am sure you wish to know the working of Bitcoin. Like most other cryptocurrencies, Bitcoin also works on blockchain technology. Bitcoin cannot function without the blockchain and the “miners” who are needed to verify the daily transactions.
When you trade in cryptocurrency, the money is deposited in a digital wallet used
to fund the transactions. All the transactions happen through a cryptocurrency
exchange like OKX. All transactions need to be verified through a network of
computers involved in the process of mining.
These miners use powerful computers to figure out the legitimacy of the dealings. After verification, a block is created, and the miners release tokens into circulation. All these blocks are linked together to create a blockchain. It is like a public ledger that carries a permanent record. The blockchain data cannot be altered without modifying the previous blocks.
Growth of Bitcoin:
Satoshi Nakamoto, the creator of Bitcoin, capped its supply at 21 million tokens. Every purchased Bitcoin was put into the blockchain technology. The first block that was mined in 2009 was known as the Genesis block. Over the past few years, people have changed their perceptions about cryptocurrency.
They were scared to invest in the currency earlier, but the opinion has changed now. The currency has constantly been booming, and the cryptocurrency market has proven its worth. Bitcoin has the largest market cap, and even traditional investors want Bitcoin to be a part of their portfolio. It adds to the diversity in their portfolio.
The creation of Bitcoin is different from the creation of cash through traditional investments. It is not controlled by the central bank and is completely decentralized. It is based on open-source software and follows blockchain technology.
Is Bitcoin real money?
Bitcoin can technically be treated as real money. The currency is totally online, and you do not get access to any physical coins or notes. But you can buy things using Bitcoin. Many shops may not accept it yet, but you may convert these bitcoins to cash whenever needed using the services of a third-party exchange or a peer-to-peer payment exchange.
Some businesses in Canada, the USA, the EU, and Australia have started accepting Bitcoin, but it will take some time to compete with the traditional currency. Bitcoin is even banned in some countries like Russia, China, and Vietnam, where it is not treated as legitimate.
Cryptocurrencies like Bitcoin can be purchased using U.S. dollars. You must have a digital wallet in your investment app to buy Bitcoin. You fund the wallet with dollars and then purchase the currency through the exchange. Coinbase is a popular Cryptocurrency exchange. A lot of online brokers also deal with the trading of Bitcoin.
Converting Bitcoin to cash:
There are two methods to convert Bitcoin to cash. The first method uses a third-party exchange broker, and the other uses Peer-to-Peer exchange platforms.
1. Third-Party Exchange Broker
A third-party exchange broker is a cryptocurrency exchange. They work on the same principles as a foreign exchange broker. First, the Bitcoin is deposited in this exchange. Then, after successful deposition, you can withdraw the amount in the form of currency, and the amount gets credited to your bank account.
It’s quite a simple and secure way to convert your Bitcoin. But it may take up to 5-6 days for the money to be credited. In addition, this will involve some transaction fees.
2. Peer-to-Peer Platforms
Peer-to-Peer Platforms are a quicker way to convert Bitcoin to cash. Here you will sell your bitcoins to other people and choose the payment method. This method involves less cost, and you get a better exchange rate. The buyer will transfer the amount online or deposit money in your bank account.
Some peer-to-peer platform allows you to keep the bitcoins till you receive the payments. They do not disclose your identity and secure your connection through a VPN.
The value of Bitcoin has touched a record high in the past few years. But the question about sustainability is still unanswered. Many people feel the rise to be mere speculation, but the investors in the digital market are on a continuous rise.
The future of Bitcoin depends on stability, market value, and security. The risk factors involved in the investment need to be assessed before investing. While investing in Bitcoin has pros and cons, you can definitely convert it into money through exchanges. If you wish to have a diversified portfolio, you must evaluate the benefits and risks and never put all eggs in one basket.