Bitcoin (BTC) is the world’s foremost cryptocurrency, available on numerous trading markets. I’m sure most of us have come across Bitcoin, or at least know that it’s a digital currency. For a long time, people believed Bitcoin was a bubble that was ready to pop, but since its launch 12 years ago, BTC has exploded in popularity. It is now the 5th largest currency in the world, and now is the time to accept it rather than continue denying its existence.
Let’s be honest, the chance of Bitcoin collapsing is growing slimmer every day. I can say this confidently due to the recent adoption of Bitcoin by Visa, Mastercard, and PayPal, who are now accepting Bitcoin as a payment method for retail transactions. Additionally, some publicly owned companies like MicroStrategy, Square, and many others have diversified their assets into Bitcoin, showing us that Bitcoin will soon become integrated with companies, just like the global currencies we have today (GBP, USD, JPY).
What is Bitcoin (BTC)?
Unlike the image above of a worthless bitcoin, Bitcoin is a digital currency created in January 2009, following the 2008 financial crisis, which caused a global uproar as the wealthy made mistakes while getting richer, and everyone had to face the consequences. This is why Bitcoin offers lower transaction fees and is operated by a decentralized authority (non-sovereign). Bitcoin and Satoshi, the smallest unit of a bitcoin, can be traded or stored within a decentralized ledger system called a blockchain. The creator of Bitcoin, who still remains anonymous, designed Bitcoin to become the scarcest commodity on earth, as there will only ever be 21 million bitcoins. At the time of writing this post, around 18.5 million bitcoins have been mined, and the remaining 2.5 million will be mined progressively by the year 2140. As we get closer to the 21 million limit, mining Bitcoin will gradually become harder. As you can guess, this will mean overtime getting your hands on 1 BTC will eventually become a luxury. This will naturally increase the value of Bitcoin over time, as there is a change in demand and supply.
Recently, in the news, Bitcoin hit a new high of $40,000. This marked a 400% growth from 2020, where the price was at $10,000 in October 2020. However, if you check the current price as of the end of January, the price dropped to $32,000. This retracement is actually very healthy in terms of growth, as people tend to start selling Bitcoin once a rounded figure is reached. This is completely normal and correlates with long-term growth. If Bitcoin had continued to rise beyond $40,000, the inevitable pullback would have been much greater. At the time of writing this, most analysts predict the price will consolidate at this level for a while before reaching a target of $100,000 by the end of 2021.
Why does only 0.5% of the world population own bitcoin?
There are many reasons, but the general consensus is the lack of understanding of how to buy your first bitcoin. Hopefully, by the end of this article, you can be part of the 0.5% of the population who are owners of bitcoin.
One of the main reasons why I never looked at bitcoin was ignorance. I didn’t understand what it was, so I just pretended it didn’t exist. I completely understand that “the most traumatic/difficult part is buying your first bitcoin.” Another reason was the news, which constantly highlighted how people had lost thousands of bitcoins through not being able to access their accounts or damaging their hardware. Although these are all real consequences of bitcoin and care should be taken at all times, however, after understanding how bitcoin operates, I realized that these things could happen even with fiat currencies (USD, GBP) as well. To understand why these problems arise, it is important to see how bitcoin is stored.
How is Bitcoin stored?
Hardware Wallet
This is a special type of wallet that secures the user’s private keys offline, onto physical hardware. The main advantage of this is that your bitcoin is not accessible to hackers, as it’s off the grid. On the contrary, this safety measure can prove to be the same reason for losing your fortune should you damage the key, as the key is as delicate as a USB. This is similar to if you lose the only key to a vault, except there is no locksmith in the world who can open the door.
Bitcoin Exchange/ Bitcoin Wallet
A bitcoin exchange/wallet is a digital website that lets you convert fiat currency like US dollars, Euros, and Bitcoin into Bitcoin. This is similar to the travel money exchanges we see in airports, but instead of receiving the exchanged money in hand, Bitcoin is stored in the digital wallet. Although the exchange gives you access to your bitcoin, it still remains under their control. This is why it is important to choose a bitcoin wallet with an established reputation. There is a wide range of Bitcoin wallets available online, but the easiest one to get started with is Luno, which is similar to online banking, as it does have the option to safely reset your password whenever we forget it.
