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So What Is Bitcoin?

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So What is Bitcoin?

what-is-bitcoin

It has been ages since I have done a finance-related article, specifically on investments.
You know I am partial to mutual funds and UITFs and they are the investment products I would recommend to beginners.
But lately, I have been getting questions on Bitcoin and if Bitcoin is a good investment.
So let us answer the following:

What is Bitcoin?

You may have been hearing about Bitcoin a lot lately.
That may be because it is one of the most popular kind of Cryptocurrency right now.
Bitcoin is a currency.
And like any currency (e.g., peso, dollar, or Euro), its only use is  to have it in exchange for actual goods or services.
So the way we should look at BitCoin is not as an investment, like some sponsored Facebook post might claim, but as a currency.
Unlike any currency though, BitCoins are not controlled by any government and they are completely digital.  They are virtual coins, coins you cannot bet on with heads or tails hehe.

How Do People Make Money With BitCoin?

BitCoin’s value has been going up in recent years.
  • In 2010, 1 Bitcoin (BTC) was virtually useless.
  • In 2011, 1 BTC were equaled to 1 USD
  • In 2013, 1 BTC reached up to 1000 USD
  • In 2015, 1 BTC went down to 500 USD.
  • In 2017, 1 BTC reached 9000 USD.
Wow! If you had 1 Bitcoin in 2011, that would be equivalent to $9,000 this year!
If you had 1 BitCoin in 2013, it is equivalent to $1,000, but in 2015, the same BitCoin would only have a value of $500.
If you held on to that BitCoin, its value now would be $9,000!

So how do you make or lose money with BitCoin?

Through currency exchange,
It’s like the US Dollars to Philippine Pesos and how the peso goes up and down over the years.
Bitcoins are like that, only its ups and downs are bigger (In thousands instead of ones) and they happen at a faster time frame.

Why Is The Price of Bitcoin Going Up?

So it is clear that BitCoin is a currency, right?
And the value of  a currency is driven by the number of people who use it.
But if you don’t use BitCoins in your daily life simply because you can’t use your BitCoins at the mall or at the grocery, why is the price of BitCoin going up?
There are two reasons:
  • Because more and more governments, businesses and everyday people worldwide are willing to accept it as a currency.
  • Because people are buying it to make money.
With reason no. 1, the more BitCoin is accepted as a worldwide currency, the more will its worth go up.
With reason no. 2, people are speculating with BitCoins, thereby increasing the demand for BitCoin, making the worth of BitCoin go up, but only for a short term.

Will BitCoin withstand the years and become more popular as the years go by?

Cryptocurrency is virtually new and we don’t really know if they will still be present in the future and outdo “real” currencies.

However, I am expecting that the value of BitCoin will go up, simply because of reason no. 2. Demand for BitCoin will go up, since people speculating on it will want to make more with it.

Until the craze dies down and the value will go to its actual worth as a currency.

So for the meantime,

For beginners, I am recommending that you may use bitcoin as a currency like I do with with Coins.ph.

But! Do not treat it as an investment.

If you are financially literate and would like to explore the world of BitCoins, treat BitCoin as a speculative investment.  Invest in BitCoin only money that you are not afraid to lose and make sure you already have an emergency fund, regularly saving and investing.

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