3 things you need to know before investing in Bitcoin


3 things you need to know before investing in Bitcoin

July 5, 2017

Why Invest in Bitcoin Bitcoin is the most widely used digital currency in the world. There are over 500 different digital currencies. Many exist merely for entertainment value whilst others present a strong economic use case and present an investment opportunity for early participants. Investing in digital / crypto currencies however is fundamentally different from investing in forex or investing in securities. For the unsuspecting investor these differences can carry significant risk. Before you invest in Bitcoin, here are three things you need to know;

Bitcoin - an investment that hedges against inflation

Countries these days operate fiat currencies where a central bank can issue more currency as when deemed required. If quantity issued is not kept in check (which is often the case) the currency of a country deflates in value. Printing money leads to inflation which robs an individual of purchasing power. Bitcoin is fundamentally different. The number of Bitcoins produced is fixed by a computer algorithm which emulates the rate a precious metal like gold is mined. There is a limited supply and as more are mined it gets harder and harder to find and hence each Bitcoin becomes more valuable.

Bitcoin adoption is growing as it replaces traditional financial services

The core use case of bitcoin is centred around being more costs effective than traditional financial services. Bitcoin utilises "block chain technology" which utilises decentralised computers all over the world to ensure security and trust. This automates certain functions which then allow users to transfer money directly to anyone without a middleman like a bank. This is a strong economic motivator for world wide adoption. For example, when you travel to different countries paying by Bitcoin you avoid traditional currency conversion fees which is quite often exorbitant.

Bitcoin will provide financial access to the developing world

A large portion of the developing world does not have access to financial services. Such services is key to driving growth and helping people out of poverty. Bitcoin has the ability to connect capital from the developed world with the need for investment in the developing world. It can enter new markets where banking infrastructure do not exist. The demand for bitcoin in these parts of the world will grow.

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