Crypto: Learning How to Invest and Estimate with Cryptocurrencies

Some Advantages and Risks of Bitcoin

One significant advantage of Bitcoin is its low risk of inflation. Traditional currencies suffer from inflation and tend to lose their purchasing power over time due to governmental quantitative easing efforts to stimulate the economy.

Bitcoin, on the other hand, is protected from high inflation since its supply is capped at 21 million units. This means that the issuance of new Bitcoins will slow down as the total supply nears its limit, with the final Bitcoin expected to be mined by 2050.

Compared to traditional currencies that rely on government backing, Bitcoin has a lower risk of collapse. The failure of traditional currencies often leads to runaway inflation or the sudden loss of savings.

Bitcoin’s exchange rate is not controlled by any government and is a digital currency accessible globally. It is also remarkably portable; a billion dollars in Bitcoin can be stored on a memory stick and easily transported.

However, Bitcoin's untraceable nature can be a drawback, as governments and other organizations cannot track the source of funds, which may attract unethical behavior.

How to Make Money with Bitcoin

There are three primary ways to profit from Bitcoin: saving, trading, and mining. Bitcoin can be traded on open markets, allowing you to buy low and sell high.

Volatility of Bitcoin

Recently, Bitcoin's value dropped due to the sudden suspension of trading on Mt. Gox, the largest Bitcoin exchange at the time. Reports suggested that trading was halted because of a malleability-related theft worth over 744,000 Bitcoins, which undermined investor confidence in the virtual currency.