Should I Invest in Bitcoin?

I’ve seen the price of bitcoin rise dramatically over the last few months. A few months ago, I had no idea what bitcoin was and had never even heard of cryptocurrency. Cryptocurrencies have, however, caught everyone’s attention as a result of recent government and media attention.

Because it facilitates quicker and less expensive transactions, crypto currency, or more simply digital money, is quickly gaining acceptance throughout the world. Each of these transactions has its own private key or signature, and they are all protected by cryptography. Everyone wants to get in on the action because of its increase in value and popularity. With bitcoin, there are primarily two ways to generate income. The first strategy involves buying the coin as an investment in the hope that its value will rise. The second is the process of “mining” bitcoins. Once a transaction has occurred they are then verified over the network by “miners” using complicated algorithms. Transaction fees and/or newly created bitcoins are given to them as payment for their labor.

As this currency is relatively new and has no intrinsic value, there is a significant risk/reward factor from an investing perspective, leading to volatility and significant price changes. A plus is that there is a lot of money invested in it and businesses are agreeing to use it, so we don’t know when its value will return to zero.

“Mining” also has a big risk/reward factor. In the beginning of bitcoin, you used to be able to “mine” with an ordinary laptop or home computer. But now as more people are doing it the difficulty and power needed to “mine” increases. There is a cap on the number of bitcoins that can ever be created (21 million). And as we get closer and closer to 21 million the amount of bitcoin rewarded for each successful “mine” gets smaller and smaller. Now “miners” looking to be profitable have to invest in complicated high tech mining rigs and there is still no guarantee they will be profitable or even make their costs back.

However, there is a third, safer choice. The most profitable business in any sudden event that promises riches is selling the tool that makes these riches possible. For example, in a gold rush it would be the shovel and in “mining” for bitcoin it would be mining rigs or powerful graphic cards. You could make a sizable profit selling these if you could produce them or even just get your hands on some at a discount. Unfortunately, very few people have the luxury of doing so.

People are rushing to the riches that are dangling in front of them, which is giving con artists a field day. Before making any investment, read articles, peruse forums, monitor the bitcoin market, and investigate your costs and ROI. You ought to practice this for a few weeks, in my opinion, before investing any money. This market is incredibly unstable, making investments even riskier.

However, I believe that in the end, everything comes down to whether you are willing to take the chance of losing everything in order to possibly succeed in life.

Are you?