If you have been paying attention to Bitcoin, or any other cryptocurrency for that matter, over the last year or so, you would know it has gone from strength to strength. Bitcoin was valued at $ 625/ Bitcoin in April 2016 and is now trading around $ 2450/ Bitcoin as of today which is an increase of 438%
But what does this mean for investors? Should they be looking at Bitcoin as a long-term investment with potential returns through dividends and growth? Or should they stay away due to the volatility associated with Bitcoin shares on the stock market?
The simple answer is yes. Bitcoin Prime can be considered as both an investment opportunity and also very risky due to its volatility. If you are willing to take the risk Bitcoin can be rewarding in the long term, but if Bitcoin is just another bubble on par with Tulip Mania then Bitcoin investment should be avoided.
Properties of Bitcoin Investment
Bitcoin has many properties that make it attractive to investors. Bitcoin is scarce, there will only ever be 21 million Bitcoin created and currently, 15 million Bitcoin have already been mined.
Bitcoin is also divisible. Each Bitcoin can be split into 100 million parts so they can easily transact small amounts of Bitcoin between each other without needing to use a smaller unit like a penny or cent. Bitcoin transactions are pseudo-anonymous. When you invest in Bitcoin you do not need to provide any information about yourself that could identify who you are or where you come from, all you need is an address containing Bitcoin and you can exchange Bitcoin with anyone else.
Bitcoin is also a decentralised currency. This means that Bitcoin has no central authority controlling it or its value, unlike currencies such as the Australian dollar or Euro which are controlled by their respective governments and can be manipulated at will.
Risks in Bitcoin Investment
The problem for Bitcoin when it comes to investment is the exchanges where Bitcoin is traded do not meet many of the requirements expected of traditional stocks on the stock market such as dividends and growth. Firstly, there is currently no official Bitcoin price.
The price displayed on most websites and apps that list Bitcoin prices is determined by demand in the market place which varies from minute to minute depending on who wants to buy and sell Bitcoin and how much they want to buy or sell them for. Bitcoin prices on exchanges also do not work like the share market.
Bitcoin prices will increase and decrease depending on how many Bitcoin is currently available for sale, as more Bitcoin comes onto the market Bitcoin prices will fall as those looking to sell realise there may be some profit to be made through waiting rather than selling their Bitcoin now.
This means Bitcoin is very volatile and its current price isn’t a great indication of where Bitcoin will be trading next week or even tomorrow. Investors should instead look for companies that provide dividends on Bitcoin purchases. This way they can collect some return over time from investing in Bitcoin without worrying about the day-to-day swings and believe it or not, there are already many companies that offer this service:
1. Genesis Mining
Genesis Mining is Bitcoin cloud mining. Bitcoin mining is the act of verifying Bitcoin transactions by solving mathematical equations that take place on Bitcoin’s public ledger called the blockchain. Bitcoin miners can be thought of as performing essential functions for Bitcoin just like how gold miners produce more gold from mines over time. In return, they are compensated with Bitcoin which can then be sold on an exchange or used to pay for goods and services, just like any other currency.
They provide a service where you can purchase hash power from them to mine Bitcoin and receive daily payouts each day depending on how much hash power you have purchased. The initial cost may seem high but it is a one-off payment and if Bitcoin value rises as expected it should provide good returns.
2. Bitcoin Cloud Mining
Bitcoin cloud mining is Bitcoin cloud mining where Bitcoin miners are able to purchase Bitcoin mining hardware, upload the Bitcoin software and start Bitcoin mining by solving Bitcoin blocks using their hash power.
It’s similar to purchasing any other Bitcoin mining hardware like Bitcoin ASICs or Bitcoin GPUs but you rent hash power through an online provider instead of having your own Bitcoin mining hardware. Bitcoin cloud Bitcoin miners obtain Bitcoin from Bitcoin blocks and since Bitcoin blocks are limited to producing 21 million Bitcoin, Bitcoin has a finite supply just like Bitcoin. Bitcoin mining Bitcoin cloud Bitcoin miners do not have to pay for Bitcoin’s price volatility as their Bitcoin mining revenue is converted into Bitcoin.