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Bitcoin – How does it work

Bitcoin has experienced many ups and downs since its creation in 2009. The first cryptocurrency aimed at revolutionizing payment systems in the world, the virtual currency created by the mysterious pseudonym Satoshi Nakamoto appears today as a weighty alternative financial investment. Is it a good idea to invest in Bitcoin? And why do some people take the risk of investing in virtual currencies?

Bitcoin: how does it work?

Before seeking to invest in Bitcoin (BTC), it is essential to understand how it works and the risks of this type of investment. The most famous crypto in the world can thus boast of having several strings to its bow:

It is used as a unit to determine the value of a good or service,

It facilitates exchanges between individuals on the principle of P2P (peer-to-peer),

Bitcoin can be stored asa part of you holding strategy or can be short term traded

Bitcoin price volatility

Like the stock market indices, the price of Bitcoin varies every day, sometimes impressively, as demonstrated by its historic rise to more than 40,000 dollars in January 2021. Very unpredictable, the variation in the price of Bitcoin plays a big role in the risk taken by investing in it.

There are several reasons for these sudden and impressive changes in the price of BTC:

Bitcoin is quoted continuously on cryptocurrency exchanges,

The cryptocurrency market is only thinly capitalized compared to stocks and bonds,

The youth of BTC,

It is highly subject to speculation, as it is impacted by supply and demand.

Virtual assets

Since BTC is not a legal tender currency, there is no guarantee from central banks or coverage by the deposit guarantee fund. If your intermediary (management companies, for example) goes bankrupt, you are not protected unless you take out specific insurance.

Your crypto assets can be kept for the long term or resold quickly if you have a trading strategy in mind. Anyway, you will have to store them: no life insurance here, but electronic safes – or hard wallets – online to leave your Bitcoins in an account. There are even some that take a physical form, such as a USB key.

Between fiction and reality

Get-rich-quick proposals, digital fortune utopias, incentives to buy quickly… You can find everything on the web, and you will have to measure your investment before making your first bank transfer. Although anyone can decide to buy Bitcoins or fragments of them – called satoshis – this type of investment is mainly aimed at insiders.

Technical and financial knowledge is therefore strongly recommended: speculation is dangerous in principle, and the risk of the capital loss is very present. Before investing, make sure to whom you entrust your money. Reading brokerage reviews such as Voytegeon Review might be useful if you search for decent brokers.

There are also other points on which we will have to be careful when it comes to the crypto market:

  • The lack of regulation,
  • Lack of detailed information
  • The risks of fraud and scams,
  • Attractive offers of often dubious training.

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