These days, it seems everyone's talking about cryptocurrencies. But digital money is nothing new. In fact, Bitcoin started in 2009 as a way to trade currencies without involving financial institutions. But Bitcoin has plenty of competition in 2021, leading investors to wonder if it's still the best bang for their buck.
What Is Bitcoin?
In 2009, the world's first cryptocurrency was introduced. It was described in detail in a whitepaper authored by Satoshi Nakamoto, which was a pseudonym for one or more inventors who chose to remain anonymous. Bitcoin provides a peer-to-peer method of transferring money, with all transactions ledged in a central ledger, known as the Blockchain.
Since its founding, Bitcoin traders have seen plenty of turbulence, with the price spiking and plummeting multiple times. As with many cryptocurrencies, the biggest issue as an investment is that Bitcoin's ups and downs aren't driven by the economy. Instead, investor activity often pushes price changes.
The number of merchants accepting Bitcoin as payment is growing and only expected to continue to grow in the coming years.
Is Bitcoin a Good Buy?
As the oldest cryptocurrency, Bitcoin has one very important thing going for it: history. With newer cryptocurrencies, it's impossible to trace back a couple of years, let alone five or 10. With Bitcoin, you can go back more than a decade, seeing the highs and lows.
But Bitcoin's biggest drawback is its current value. Since late 2020, Bitcoin prices have been steadily climbing, jumping from $10,684.20 in October 2020 to $40,378.70 in January 2021. In May 2021, prices exceeded $50,000 before nosediving to $38,000 by the end of the month.
The general rule in investing is to buy low, but the five-figure price makes it tough to afford it. If Bitcoin drops down to its 2019 prices of below $4,000, it might be a good buy, but there's no guarantee that will happen.
Cryptocurrency Accessibility and Bitcoin
Where Bitcoin really stands out is in its accessibility. As the first and best-known cryptocurrency, Bitcoin is at an advantage. You can buy it on a wide variety of exchanges and store it in any number of wallets to keep it secure. There are even Bitcoin ATMs located around the U.S. to let you turn your coins into cash.
But the real benefits come when it's time to spend your cryptocurrency. The number of merchants accepting Bitcoin as payment is growing and only expected to continue to grow in the coming years. Current retailers include Overstock, Twitch and Norwegian Air, but you can also convert your Bitcoin into gift cards that you can spend anywhere.
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Bitcoin’s Evolving Technology
A much more affordable Bitcoin option is Bitcoin cash, which uses the same methodology. Like Bitcoin, Bitcoin cash is a peer-to-peer payment option that uses the ledger to record transactions. But Bitcoin cash's build processes transactions faster, which means lower fees and a faster turnaround on your purchases.
Another huge benefit Bitcoin cash brings is affordability. The price has been steadily climbing since March, moving from $500 to more than $1300 in early May. Currently, it has dropped to $700, which is a big break when you compare it to Bitcoin's five-figure price point.
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Bitcoin Investment Options
If the Bitcoin price is too steep for your bank account, there are some other options. One is to find an investment platform that will let you participate in fractional Bitcoin investing. With fractional investing, you can buy a fraction of a share, which means you could buy in as low as $25 or $100.
There are also opportunities to earn bitcoin through the things you do every day. Some credit cards issue reward points as Bitcoin, helping you build your wallet without putting any money into it. There are also apps that will let you earn bitcoin as you shop or complete other online tasks.
Cryptocurrency can always be a risky investment, but Bitcoin remains fairly solid, thanks to a long history and well-recognized name. With so many different options for investing, you can combat the higher prices and buy in at a lower rate. But it's important to watch the market and weigh the risks to be sure you're comfortable with the volatile nature of cryptocurrencies.
Consider also: Are There Taxes on Cryptocurrency Trades?