By now we have all heard about the new meteoric rise of bitcoin this year.
The price has risen from below $1,000 to over $20,000 (only for a few minutes) all since January 2017.
So, what is bitcoin and what can you buy with it I hear you ask?
What is Bitcoin?
Bitcoin is a type of digital cryptocurrency. The main feature of cryptocurrencies is that they operate on a decentralised peer-to-peer network, with no central authority or government backing. It was created as a finite resource and only 21 million bitcoins can be created.
How do you get Bitcoin?
You can buy bitcoins with fiat currencies like Australian dollars from online exchanges or you can create brand new bitcoins in a process known as mining. Bear in mind mining a bitcoin takes a huge amount of computer processing power and can take years to mine one, and currently an at home PC does not have the processing power to mine them.
What can Bitcoin be used for?
When it was first created it was mostly used on the dark web to purchase illegal items. However, the first ever document purchase with bitcoin was the purchase of two domino’s pizzas for 10,000 bitcoin (now worth around $170 million, that was expensive pizza). More and more major retailers and options are becoming available to spend your bitcoin on, such as Overstock and Dell computers.
Bitcoin as an investment?
Most people are not buying bitcoin to purchase items with, instead they are using them as an investment. And if you did buy in at the start of 2017, your returns would be over 1,000%. However, bitcoin has wild price fluctuations going from $20,000 down to $14,000 within half an hour. Central banks and other regulatory bodies are saying bitcoin is a bubble and isn’t a sustainable investment. It’s hard to tell who is right and who is wrong but there are no fundamentals behind the rise of bitcoin and one day you might wake up and find your investment is worth $10 in the blink of an eye.
Bitcoin is the world’s newest currency and has undergone a meteoric rise last year. Weather or not it is a good investment or a speculative investment, no one knows and it will be interesting to see what happens to bitcoin in the future.