How to Invest in Virtual Currency
All around the world, financial managers are beginning to take the investment potential of virtual currency seriously. Since Bitcoin’s meteoric initial rise, usage has become more widespread and valuations have become more stable. However, Bitcoin and other virtual currencies aren’t without risk. As with any new technology, there is a lot of confusion around how Bitcoin works and where to buy it. This has led to a rash of fraudulent exchanges and other scams. The best way to buy Bitcoin or alt coins with confidence is to educate yourself first.
One of the key features of Bitcoin and other cryptocurrencies is that there is a maximum limit to the number of available coins. Whereas a government can print more money at any time, driving up inflation in the process, Bitcoin is designed to limit the release of coins into the wider economy. A process called mining, in which computers solve complex equations to unlock new coins, is essential to this.
Mining is required to bring new Bitcoin into circulation. While anyone can mine Bitcoin, doing so requires a significant outlay of time and money, with no guarantee of success. Alternately, existing Bitcoin can be bought through an exchange, traded with an individual or obtained as payment for goods and services, just like convention currency.
Bitcoin vs. Alt Coin
Since its release in 2009, Bitcoin has been the best-known and most popular cryptocurrency for investors. Today, it retains the largest share of the market. Together with its recently released second offering, Bitcoin Cash, Bitcoin is positioned to stay in the dominant position for the indefinite future.
However, there are several downsides to investing in Bitcoin, including its high price and instability. Several alternatives to Bitcoin — known as alt coins — have emerged in recent years, gaining popularity among both everyday users and cryptocurrency investors alike.
With Bitcoin currently sitting around $4500/unit (as of August 2017), its potential for further growth is uncertain. Alt coins are almost all valued lower, which means they have more room for expansion and are more likely to deliver the strong returns associated with Bitcoin in its early stages of growth.
The downside of this, of course, is an increase in risk. Indexes such as Coin Market Cap currently list hundreds of alt coins. It’s not uncommon for a product to gain a lot of hype early on, only to fizzle out shortly after its launch. If you plan on investing in a virtual currency other than Bitcoin, it’s important to do significant research first.
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