Bitcoin and cryptocurrencies are all the rage. We explain what this virtual currency is, how it works, and how to invest in bitcoin in Spain in 2021, which is once again a real roller coaster for cryptocurrencies.
Virtual currencies emerge as an alternative to traditional fiat currencies and have their maximum exponent in bitcoin. Cryptocurrency has become one of the best long-term investments (full of risks, yes). Someone who had invested 1,000 euros in 2010 today would be a millionaire.
At Finest, we have also created a section where you can see information on different platforms to buy bitcoins or cryptocurrencies, compare and then decide which is the best one for you. Here you can see different platforms where to buy bitcoins.
What is bitcoin
Bitcoin is an independent and intangible virtual currency. What differentiates this cryptocurrency from a common currency such as dollars or euros is that it does not belong to any State. In other words, what are bitcoins, and how do they work? They are decentralized currencies since no central bank, government, financial institution, or company acts on them.
The Central Bank can intervene to affect the price through massive money issues or interest rates in the euro. This is not possible with bitcoin. What’s more, its creators have already set a limit on the number of bitcoins in circulation. They will reach 21 million in 2030, and there will be no more.
Control of bitcoin rests with the users themselves. They are the ones who validate any operation through exchanges (Point to Point P2P) without the intervention of the state or any institution. The structure itself makes it impossible to manipulate its value. To make any change, the entire user community must approve it.
what is bitcoin and how it works ?
Bitcoin is the first electronic currency that managed to be implanted with some solvency, but not the first to appear. What differentiates bitcoin from other attempts is its blockchain technology – later on, we will explain better what it consists of.
August 2008 marks the birth of Bitcoin with the registration of the domain bitcoin.org. Two months later, in October, the first document that explains the design of the virtual currency was published, and in January 2009, the bitcoin network was officially born with the publication of the first open-source code of a client. At that moment, when the first block of Bitcoins with 50 prize bitcoins is mined, and the first shipment of this coin is made - later on, we will explain what bitcoins mining consists of. In October 2009, the first transaction in dollars was carried out with a price of 1,309.03 BTC (Bitcoin) for one dollar. The first exchanges of Bitcoins for dollars were made already in 2010 for 1 BTC for 0.003 dollars. Also, in 2010, Mt Gox was created, one of the largest bitcoin brokers that would later become famous for starring in the most significant scam with this virtual currency. In May 2010, the first purchase in bitcoins took place. Specifically, 10,000 BTC was paid for two pizzas. We can say that these are the most expensive pizzas in history. At the current price, we are talking about $ 30 million for two pizzas. In 2011, other cryptocurrencies began to emerge, and the growth of Bitcoin continued until 2013, when it received a new push, and its price reached $ 3,000. It was not until 2015 when bitcoin began to be legislated as a payment method - we remember that this is its primary function. That year, the EU exempted operations with this virtual currency from VAT, while the technology that allows mining and obtaining bitcoins faster advances. In addition, it elevates it to the rank of payment method. But the true boom of Bitcoin does not come until 2017. At the beginning of the year, it exceeds 2,000 dollars and even 3,000 dollars per BTC. According to the experts, the reason is that the BTC would be ceasing to have value as a means of payment and would begin to have it as a financial asset, something similar to what happens when investing in gold. Throughout 2017, the value of bitcoin surpassed $ 20,000, marking a milestone. In 2018, volatility reached the virtual currency and registered a fall of more than 80% from its highs to approximately $ 3.00. Between 2019, the value of bitcoin stabilized again at around $ 8,000. In 2020 with the coronavirus crisis, bitcoin became an ally for investors, and at the end of the year, it traded close to $ 30,000. In 2021 the cryptocurrency has smashed all its records. Currently, Bitcoin has reached over $ 46,000. Among the reasons is, for example, the purchase of Bitcoin for apart from Tesla, which has invested $ 1.5 billion in the cryptocurrency. To this is added another relevant question: how many bitcoins are there mined? At present, the 18.8 million units of bitcoin mined have already been exceeded, which brings us closer to the maximum threshold of 21 million bitcoins that will be created. Its production and value are based on the law of supply and demand. Another interesting detail is that Bitcoin has a fixed limit of 21 million coins. Initially, this limit was expected to be reached in 2030. However, the estimates are getting longer and longer. As there are fewer bitcoins every day, mining becomes more complicated.
El Salvador became the first country to establish by law Bitcoin as a forced exchange and currency. The cryptocurrency suffers ups and downs every time Elon Musk, CEO of Tesla, comments, events that have caused the conversation around this and other cryptocurrencies to be more and more frequent,.
how much do we understand about cryptocurrencies?
According to a Harris Poll survey of 1,984 people between February 12 and 14, 2021 – which was shared with Bloomberg – 61% of those interviewed who indicated they had heard of cryptocurrencies said they had little or no understanding of cryptocurrencies. Its operation. Only 14% of those interviewed said they understand “very well” how they work.
Suppose you belong to the percentage of people who are not experts in cryptocurrencies, but you are interested in exploring the idea of investing in bitcoin and other cryptocurrencies such as ethereum, Cardano, or dogecoin. In that case, we will tell you how to do it.
The World Bank says it will not help El Salvador implement the bitcoin law.
But before making a decision, you should know that unlike other assets, such as gold, bitcoin and other cryptocurrencies have no other purpose than to be an asset. “So if everyone decides one day that bitcoin is not worth much anymore, then, in fact, it will not be worth much,” explained Eric Maskin, winner of the Nobel Prize in Economics to CNN, who called cryptocurrency investing a game of random.
For this reason, cryptocurrencies are susceptible to the economic policies that some countries may take or to the statements of essential investors, such as Elon Musk.
Unlike other currencies, such as the dollar, cryptocurrencies are not backed by any government, so if cryptocurrencies are stored with a third-party company, and it closes or is hacked, the government has no obligation to intervene or help them. They are affected to get their money back.
And while investing in cryptocurrencies carries risk, some risks can be avoided, such as scams. The U.S. Federal Trade Commission (FTC) reported that scammers have profited from the cryptocurrency boom, and from October 2020 to March 2021, around 7,000 people reported losing more than $ 80 million in scams.
Many people reported being lured to fake websites with the idea of investing or mining cryptocurrencies. There are also “gift scams” supposedly sponsored by celebrities, and scammers have even used online dating sites to mislead people.
The FTC indicates that if someone offers guaranteed money, great returns, free money, or claims without details or explanations, it is likely a scam.