Bitcoin is a topic that pops up in the news every now and then. It’s also the kind of thing a freelance writer with ADD might get distracted by when he was supposed to be rebuilding the content on an old website. In fact, he might feel guilty for spending so much time looking into it that he would have to write several articles about Bitcoin as a way to make it seem more like work.
* Ahem. *
What Is Bitcoin?
Explaining Bitcoin is a little bit tricky. In essence, Bitcoin is a digital currency. There are no actual coins, only computer data. In many ways, this is not unlike most of the US currency, which exists electronically on bank computers and balance sheets, not in stacks of hundred dollar bills in the basement of GE headquarters.
Bitcoin has no intrinsic value. That is, that there is no organization or group that gives it a value. Instead, it is simply a means by which bitcoins are generated in a limited supply. Like anything else, supply and demand can set a price for Bitcoins in other currency, including US Dollars.
How you convert Bitcoins to Dollars is that you find someone (actually some company) willing to give you Dollars in exchange for Bitcoins. Like any currency exchange, this comes with some fees and potentially, with some spread in the transaction rates. This is no different than converting Dollars to Euros. Where you do the conversion determines exactly how many Euros you get regardless of what the current market rate is.
Is Bitcoin a Good Investment?
The history of the exchange rate, or price of Bitcoins is the perfect way to answer the question about whether or not Bitcoins are a good investment. One of the things that makes Bitcoins so interesting to a public that usually couldn’t care less about potential new currencies, is the gold rush vibe behind the whole thing. The media was full of the story of the college student who bought a handful of Bitcoins for $20 a decade ago and suddenly finds out they are worth hundreds of thousands of dollars (assuming he cashed out closer to $1,000 per bitcoin).
As you can see, Bitcoin prices in the last few years have ranged from over $1,000 per bitcoin in late 2013 back down to the $200 per bitcoin range. Today, all the talk is about bitcoin rising over $20,000 into the $30K range.
Investing in Bitcoin is a very volatile ride, and should probably be undertaken with extreme caution and a small amount of money that would not be detrimental to your finances if it was all lost.
Some people, like distracted writers, have found a way to play in the Bitcoin space without having to invest actual dollars in a crazy market. It turns out with a lot of perseverance, and some time to figure out a few computer programs, you can actually “mine” bitcoins with your computer. The odds of finding bitcoins on your own is pretty high but if you have a computer to use, and you don’t mind wasting the electricity, you can always try and get lucky. Or, you can join a mining pool, and slowly but surely acquire a few dollars at a time.
Then, if the price did shoot back up that little gamble, and little electricity, might just pay off.