What is Bitcoin?

Bitcoin (BTC) is the pre-eminent crypto-currency in the world and was released in 2009 by Satoshi Nakamoto.

The total market value of Bitcoin is about $338 billion USD as of December 2020 (with a high above $19,000 per coin) with its next closest competing “cryptos” Ethereum (ETH) also called Ether and Ripple (XRP) valued at $63 billion USD and $24 billion USD respectively.

There are thousands of different crypto-currencies; so, most news and trading opportunities are centered around the major players in the market.  Market acceptance and value today is a far leap from Bitcoin’s earliest days when 10,000 BTC were used to buy just two pizzas for delivery from Papa John’s. At today’s market value that would be about $90 million USD per pizza. That would be a pretty good tip for the driver or one outrageous charge for extra cheese!

For those unfamiliar with crypto-currencies, “cryptos” are digital currencies, typically decentralized, that only exist as electronic data in contrast to “hard” currencies also called fiat currencies which are traditional currencies of nations that are available in “paper” notes,  metal coins or treasury notes and backed by a nation’s central bank like the United States Dollar (USD) being backed by the Federal Reserve in the United states or the Great British Pound (GBP) by Bank of England in the United Kingdom.

The excitement for traders about crypto-currencies in general has much to do with the dramatic movements in value that can happen in relatively short periods of time.

A 20% to 50 % price movement in one day isn’t unheard of and when trading in this market (in contrast to depositing with a digital e-wallet) you can set yourself up to profit with prices moving up (a BUY trade) or down (a SELL trade). Market movements over the course of a year are typically unmatched compared to other commonly traded assets. This frequent volatility in price creates the potential for dramatic profits but of course there is a corresponding amount of risk involved so trading with the assistance of a professional is recommended in order to manage that risk.

In 2020, Bitcoin had a low price in March of $4,001 USD per coin to a high price in late November/ early December of just breaking over $19,000 USD for an increase of 475% in one year.

Weekly movements of $1,000 to over $3,000- $4,000 per coin are not uncommon and the majority of that movement can even happen over one day. Since crypto-currencies are not traded by central banks they can be traded 24 hours a day/ 7 days a week in contrast to fiat currencies which are open for trading most weeks for five days (except for holidays) Monday to Friday.

In its early days until recently, Bitcoin wasn’t taken as seriously by institutional investors or large hedge funds as much as it was by speculators since it wasn’t regulated and it was generally seen as a “black market” currency used by those who might need to keep their transactions and assets hidden from governments.

Over the last few years, more and more banks and institutional investors have been embracing or at least recognizing the current usage and potential for Bitcoin and other crypto-currencies.

In 2014, Microsoft and Dell started accepting Bitcoin payments for their products.

In 2015, over 100,000 merchants worldwide started accepting Bitcoin payments.

In 2016, the Japanese government equated “virtual” crypto-currencies as having the same function as traditional “real money” currencies.

In 2017, Bitcoin split into Bitcoin (BTC) and Bitcoin Cash (BCH).

In 2019, over 5,400 Bitcoin ATM’s were situated around the world.

In 2020, Bitcoin was being listed on the Frankfurt exchange in Germany and the Chicago Mercantile in the USA.

Paypal and Square also announced they would allow users to buy and sell Bitcoin on their platforms.

After years of indifference, Ray Dalio, founder of the world’s largest hedge fund, Bridgewater, said he was now seeing Bitcoin (like gold) as a way of storing wealth due to its limited supply (21 million coins) and as a more liquid alternative than real estate.

Talk to a professional investment specialist about what size crypto-currency investment might be right for your investment goals.