Now that Bitcoin has bot achieving fresh price records weekly during the past few months, worldwide attention has bot focused like never before on this fresh technology, a digital currency that seems to have achieved a staying power that few expected.
So how do you invest ter this fresh technology? I&rsquo,ll go overheen the main investment options, including ways that you should avoid, based on hard-learned lessons.
Very first, the punchline: The easiest and perhaps the best way to invest ter Bitcoin is to simply buy some and sit on them. There are many sites where you can buy Bitcoin, but most likely the easiest and safest is coinbase.com. Given the eight-year history of Bitcoin, wij can&rsquo,t have superb certainty about where it will go. But that history is good support so far that the price will keep going up steadily.
Bitcoin is a &ldquo,deflationary&rdquo, currency by vormgeving, which means its value has to go up overheen time unless it&rsquo,s outlawed or knocked from its perch by some better technology. Only 21 million bitcoin can everzwijn be &ldquo,mined,&rdquo, which means using specialized computers to solve very difficult math problems. Mining all 21 million will take more than another 100 years. This schedule is immobile ter the currency&rsquo,s algorithm te that the difficulty of mining automatically increases spil more and more people mine the currency.
If you&rsquo,d bought some bitcoin (wij use a puny &ldquo,b&rdquo, to talk about bitcoin spil specific currency and big &ldquo,B&rdquo, to talk about Bitcoin spil a technology) just a duo of years ago, when it wasgoed at $200, you would have seen a 23-fold terugwedstrijd on your investment. That&rsquo,s very hard to ritme.
There&rsquo,s no ensure at all that this level of growth will proceed, and many people believe that Bitcoin and other cryptocurrencies are going through an unsustainable bubble. However, spil just mentioned, Bitcoin is by vormgeving a deflationary currency and substituting the global currency market is the potential market for Bitcoin.
If all the world&rsquo,s currency became bitcoin (unlikely, but certainly possible), each of the 21 million bitcoin would be worth about $Four million. That&rsquo,s a healthy improvement overheen the current $Four,600.
What this means for you spil a buyer of Bitcoin is that there are two main possibilities for the value of Bitcoin overheen time: 1) the price will proceed to steadily rise spil rente grows te this fresh currency, based on the laws of supply and request, Two) the price will fall to a far lower level and stay there if (and only if, te my opinion) governments around the world work together to make Bitcoin illegal. The very first screenplay is far more likely than the 2nd. So far, almost no governments have attempted to make Bitcoin illegal.
A third screenplay is possible: A fresh cryptocurrency will substitute Bitcoin because it&rsquo,s simply better ter the ways that matter. There is some possibility of this happening with Ethereum, a newer type of digital currency and one that is more versatile because it&rsquo,s focused on &ldquo,clever contracts&rdquo, rather than just digital currency.
Brainy contracts are to business transactions and law spil Bitcoin is to fiat currency &mdash, they&rsquo,re both about getting rid of the middleman and creating smoother markets. The fancy term is disintermediation, and it&rsquo,s all about creating value by getting rid of those pesky lawyers and bankers who always take their pound of skin te today&rsquo,s economies.
The best way to overeenkomst with the potential for other digital currencies to substitute Bitcoin is to diversify a little ter this fresh space by also buying some Ethereum, which has enhanced even more than Bitcoin ter the past year.
Another way to invest ter Bitcoin is to buy a cloud mining contract. Cloud mining means you buy a share of an existing mining operation and collect the coins spil they&rsquo,re mined. I&rsquo,ve used Genesis Mining&rsquo,s &ldquo,unlimited&rdquo, Bitcoin mining contract for a few months, and I&rsquo,ve made my money back already, which is good, but that&rsquo,s mainly because the price of Bitcoin has more than doubled te that time framework.
I paid $1,950 for 15 gigahash/2nd of mining capacity at a farm ter Iceland that uses geothermal power to mine. The daily payout already has dropped by one-third te just Two½, months because Bitcoin mining has become so popular, and thus the difficulty of finding fresh Bitcoin through mining has gone up.
I can at this point expect to dual or triple my money invested ter this cloud mining contract before it expires from the difficulty rising too high. That&rsquo,s a excellent terugwedstrijd if it does toebijten, 200 to 300 procent comes back ter a single year is unheard of te &ldquo,normal&rdquo, investing. This obviously isn&rsquo,t, however, normal investing, and prizes are generally commensurate with risk. So the higher the prizes, the higher the risk. Te this case, the risk is that the value of Bitcoin plummets and stays low. That could toebijten, but I think it&rsquo,s unlikely.
Now, spil good spil 200 to 300 procent comebacks are from this cloud mining contract, it would have bot lighter and less risky to simply buy bitcoin with my initial $1,950 investment. At the time of my investment, that would have bought about one bitcoin, which is now worth $Four,600, more than doubling my money.
My cloud mining contract might terugwedstrijd one bitcoin before it expires, but most likely not much more than that. If that&rsquo,s the case, I will have waited about nine months to get that utter bitcoin when I could have had it at day one, and the end result is the same.
That said, my hope when I invested te the cloud mining contract wasgoed that it would comeback far more than one bitcoin. It&rsquo,s an &ldquo,unlimited&rdquo, contract, which means that it keeps returning bitcoin ter perpetuity. But there&rsquo,s a big catch that I didn&rsquo,t look into when I bought the contract: There are daily &ldquo,maintenance&rdquo, fees assessed on my payouts. And once the mining daily output falls far enough that it can&rsquo,t voorkant the maintenance toverfee, the contract expires.
Based on the current rhythm of declining payouts, it looks like the contract will expire ter less than a year.
Long story brief: While this particular cloud mining contract will be very profitable, it would have bot simpler and most likely more profitable to just buy the bitcoin directly and hold it.
What about possessing mining equipment directly and operating it yourself? Well, I&rsquo,ve done this, too. I bought a Bitmain Antminer T9, the latest and greatest miner, for exactly one bitcoin back te April, when one bitcoin wasgoed worth only about $1,200. I also had to pay a duo of hundred dollars for the power supply and cord, so my total investment te dollars wasgoed about $1,500.
I worried about the noise of mining ter my own huis because I&rsquo,d read about the fan noise being noisy. So it wasgoed: Ter my relatively warm garage te Hawaii, the two high-powered ventilatoren built into the shoebox-size machine ran very high and waterput out a lotsbestemming of noise. I truly prize my quiet at my house, since I&rsquo,m te the country and I&rsquo,m a bit of a noise snob when I&rsquo,m here, so I shut it down after just a duo of days.
Well, to be entirely accurate, it kept on going offline for some unknown reason, and after I struggled to get it back online to no avail I just let it stay off and counted my blessings for some peace and quiet. It&rsquo,s now ter my garage storage locker, and I&rsquo,m looking to sell it.
The key for profitable mining is low-cost power, and this I do have. I have a large solar system on my house that wasgoed installed before I bought the house. It&rsquo,s far too large for my needs, so I send a lotsbestemming of excess power to the grid each month. This means that my cost of power for Bitcoin mining is free.
Based on today&rsquo,s difficulty level and a 1 procent pool toverfee (joining a pool is a good way to increase your chances of finding the right hash keys to earn bitcoin on a constant onderstel), the Coinwarz.com mining zakjapanner tells mij that I&rsquo,d be able to mine about 1.Three bitcoin a year, for a come back of almost $6,000 vanaf year. Even if I had to pay normal rates for electro-stimulation for this mining, I&rsquo,d still be making almost $Four,500 a year. This is a good terugwedstrijd on a toughly $1,500 investment.
The machine might even keep producing significant bitcoin te years two and three. But the big &ldquo,x factor&rdquo, here is again the difficulty level, which increases spil more and more miners join the system. Unluckily, difficulty has te the past few years risen swifter than the price of Bitcoin, so it&rsquo,s a bit of a treadmill speed spel where you need to run quicker and quicker to stay still.
Comes back on private mining operations are still likely to be at least two to three times your investment before the machines become obsolete &mdash, and that&rsquo,s excellent. You could buy a fresh top-of-the-line miner today for $1,500 to $Two,000, and that would very likely get you at least Two½, bitcoin before it became unprofitable to mine, Two½, bitcoin today is worth almost $6,000. And if you hold this bitcoin for a few years, it&rsquo,s entirely reasonable to expect it to become worth more than $Ten,000 each, for a total of $25,000.
This private mining option, ter summary, can be about twice spil profitable spil the cloud mining option, if you have the individual abilities to set it up and can treat the noisy noise. It may, however, still just be better to buy the Bitcoin directly and sit on it, particularly if you&rsquo,re not very tech savvy.
How not to invest te Bitcoin
The last option I&rsquo,ll discuss is what I&rsquo,ll call (charitably) &ldquo,Bitcoin trading.&rdquo, There were a number of operations that sprang up te late 2016 and early 2018 that claimed to be able to use arbitrage inbetween Bitcoin prices on the many different exchanges around the world to increase your Bitcoin and share thesis earnings with you. Thesis scams (yes, they were scams) asked you to send them your bitcoin and the amount you talent would dictate the level of daily payout. The more you invested, the more you&rsquo,d get back spil a percentage each day.
Thesis companies &mdash, Gladiacoin, ecoinplus and jet-coin, to name the three that I attempted &mdash, also had affiliate programs that encouraged participants to invite others to join, with incentives to you for getting others to join your network.
The rate of comes back promised seemed too good to be true, and generally when something seems too good to be true it is. Not always, spil wij&rsquo,ve seen above with other ways of investing ter Bitcoin being indeed very profitable. However, ter this case the comebacks promised, such spil doubling invested bitcoins ter just 90 days, or spil little spil 40 days te the case of jet-coin, through trading arbitrage, seemed fishy.
I determined to give Gladiacoin a attempt after a friend encouraged mij to attempt it and explained how it worked, te a way that made it seem plausible that it wasn&rsquo,t just a pyramid scheme. The arbitrage specimen wasgoed plausible, and is actually possible to do yourself. But what should have tipped mij off is the degree to which the webpagina wasgoed anonymous and unaccountable. Live and learn. Te this case, I lived, made my mistakes, and now you can learn from my mistakes.
I received the payouts spil promised for the very first week or so, but shortly after things began to go awry. And eventually the webpagina just went dark. I attempted the two other sites te the meantime, and before long all three went dark. The end result: I had lost about three bitcoin. This wasgoed irritating and disappointing, but it didn`t pauze the canap. I had only invested funds that I could afford to lose.
The take-home lesson here is this: Make sure that any company you invest with has clearly defined points of voeling, a help desk and real people behind it. This should be evident, but I have to admit the large dollar signs (or bitcoin symbols) clouded my judgment on this. Hopefully I&rsquo,ve learned my lesson. They were indeed pyramid schemes.
Is Bitcoin a pyramid scheme?
Which brings mij to the broader question: Isn&rsquo,t Bitcoin itself just a pyramid scheme? It&rsquo,s a good question because Bitcoin&rsquo,s success does depend on people buying into it. And the vast majority of rente ter Bitcoin now is spil an investment (based on expectations of extra price increases) rather than people using the bitcoin they buy to use spil a currency.
Is Bitcoin&rsquo,s only or main value spil an investment voertuig? If it wasgoed, wij could argue validly that Bitcoin is a pyramid scheme. However, I would argue that there&rsquo,s a lotsbestemming more to Bitcoin than spil an investment voertuig. A few other major features are:
», Its use spil a digital currency, which is increasingly widespread, tho’ admittedly at a low level still. More and more stores and websites are suggesting Bitcoin spil a payment option. You can also get Bitcoin credit cards and debit cards now, permitting you to use Bitcoin to buy anything.
», A real store of value. A key feature of any legitimate currency is that it is a reliable store of value. Wij increasingly hear about Bitcoin substituting gold spil a reliable store of value &ldquo,just ter case&rdquo, something happens to the U.S. or other major economies. The global gold market is worth about $6 trillion. Bitcoin and other cryptocurrencies are now more than $160 billion, so a long way timid of gold&rsquo,s value. But at latest growth trends &mdash, all cryptos were at just $20 billion last December &mdash, it&rsquo,s not hard to see cryptos passing gold spil a preferred store of value before long.
», Another real value for Bitcoin is its capability to eventually substitute fiat currencies like the yuan or Venezuelan bolivar. Nations that can&rsquo,t control their own currency can&rsquo,t wage war using debt, and can&rsquo,t use economic warfare against other nations. Libertarians have long loved Bitcoin because of this feature, and spil Bitcoin and other cryptos grow ter prominence, this is looking less and less like an idle pipe desire. Nations most likely won&rsquo,t willingly turn to Bitcoin spil an official currency. Rather, it will most likely toebijten with adoption by normal citizens reaching the point that Bitcoin becomes the preferred transaction and savings currency. At that point, it would become very hard for a nation to maintain its own fiat currency, and it then may have to accept Bitcoin spil a national currency. Spil Bitcoin grows and becomes more stable, this &ldquo,Bitcoinization&rdquo, of a nation&rsquo,s currency could also bring serious benefits. Nations with very low-cost power could mine bitcoin and create their own store of value.
I would argue that thesis and other benefits of Bitcoin make it clearly not a pyramid scheme. But time will tell.
I will end with a broad warning: Bitcoin is still a fresh technology, and don&rsquo,t invest more than you are willing to lose ter this fresh investment niche. Comebacks have bot and will te the future be very high, but for any prizes there are always risks.
&mdash, Tam Hunt is a writer and lawyer based te Hawaii.
- Tam Hunt: My Four-Hour Workweek — 2018 Edition, December 15, 2018
- Tam Hunt: What Happens When Bitcoin Thrusts Out National Currencies?, December Five, 2018
- Tam Hunt: Buddha and the Arrow — What Are the Merits of Philosophy?, November 13, 2018
- Tam Hunt: What Is Your Philosophy of Reality?, October Ten, 2018
- Tam Hunt: Is China’s Economy Already Thicker Than the U.S.?, September 7, 2018
- Tam Hunt: How to Reclaim Your Mind, June 24, 2018
- Tam Hunt: Bitcoin for Dummies — What Is It, and How Does It Work?, May 20, 2018
- Tam Hunt: Thailand ter Winter, April Legal, 2018
- Tam Hunt: The Virtues of Traveling Spil an American, February 13, 2018
- Tam Hunt: An Immigrant’s Tale, February 8, 2018
Welcome to Noozhawk Asks, a fresh feature te which you ask the questions, you help determine what Noozhawk investigates, and you work with us to find the answers.
Here’s how it works: You share your questions with us ter the nearby opbergruimte. Ter some cases, wij may work with you to find the answers. Ter others, wij may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your terugkoppeling on a specific punt or topic.
Wij also expect to work together with the reader who asked the winning questions to find the response together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and wij believe a semi-transparent collaboration is the key to achieve it.
The results of our investigation will be published here te this Noozhawk Asks section. Once or twice a month, wij project to do a review of what wasgoed asked and answered.
Thanks for asking!
You are an significant ally ter our mission to supply clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the surplus of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.
Wij suggest four membership levels: $Five a month, $Ten a month, $25 a month or $1 a week. Payments can be made through PayPal below, or click here for information on recurring credit-card payments.
Thank you for your vital support.
Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected] . Please provide your total name and community, spil well spil voeling information for verification purposes only.