Bitcoin, the enigmatic virtual currency, more precisely, crypto-currency, that everyone is talking about, is on a meteoric rise and seems to be the best thing since sliced bread. The truth is, that for investors, it just about is.
For most of us, Bitcoin is veiled in mystery. Words and phrases such as Blockchain, mining for Bitcoins, decentralization and the name of the currency itself, “Bitcoin”, coupled with the non-intuitive nature of Bitcoin value, the deep and complex mathematical basis for Bitcoin’s operation, high profile, highly damaging hacks, and the coin’s association with the Dark web and illicit trade, all sound ominous and have kept the vast majority of people away from becoming Bitcoin users and active participants in the Bitcoin market.
However, those who understand Bitcoin for what it is, an anonymous, low fee method for executing monetary transactions that is not tied to any single government have realized that Bitcoin presents a unique investment vehicle and many have been heftily rewarded.
Jack O’Connor, CEO of Trade24, one of the most prestigious Forex and Bitcoin brokers in the world, was recently quotes as saying “At Trade24, we saw the game-changing potential of Bitcoin early on. We rapidly put in place state of the art, highly secure infrastructure and trained our staff, to allow our customers to capitalize on this opportunity. Just to frame the prospects of the currency, in 2016 alone, Bitcoin, relative to the US dollar, saw a 100% gain while the Euro to Dollar rate fluctuated between 1.03 and 1.15 over the same period. Moreover, the digital currency soared 170 % in the first five months of 2017 and has huge potential for further growth”.
A seemingly straightforward statement, Mr. O’Connor underpins two major factors of successful Bitcoin investing for the average person – get help and do it right. Although the fundamentals are simple, buying and selling Bitcoin in reality, is fairly complex and can be risky. For example, over 40% of Bitcoin exchanges that were opened since trading started in 2009, have closed. Consequently, investors would do well to choose a broker, such as Trade24, with a proven track-record of security, transparency, and, above all, genuinely helpful and knowledgeable customer service.
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Back to the opportunity in Bitcoin – while the currency’s success has been stellar, Bitcoin is still a fledgling currency and market pundits are predicting even greater increases (and returns) in 2017 and beyond. Here are the main reasons why:
Basic Economics – Supply and Demand. Demand for Bitcoin has been trending upward, albeit bumpily, most notably in China where people are looking to replace the weakening Yuan with Bitcoin. On the other hand, the number of Bitcoins entering the market is also slowing down as mining becomes more difficult, and it will eventually halt at 21 million. This is the reverse of hard currencies where the central government can easily mint more money and dilute their currency’s value. The net-net of this – growing demand and decreasing supply = rise in Bitcoin value.
Bitcoin as a Safe Haven. Major macro-economic events such as the Brexit, the US elections, bank blockades (as recently happened in Greece) and the nearly zero correlation between Bitcoin and other currencies, makes the Bitcoin an investment option that is relatively safe when other options aren’t.
Legitimization. A growing number of mainstream financial institutions are adopting Bitcoin, establishments and governments, including the US, are legalizing / regulating the currency, all of which reduce the risk of Bitcoin collapsing. The trend now is towards a future where bitcoin is officially recognized and regulated by governments and institutions. Bitcoin exchanges will have a lot to gain by cooperating in building a regulatory landscape that works for everyone.
Bitcoin Blockchain Hard Fork. The bitcoin community is becoming more and more divided over the issue of block size, and it’s looking like 2017 is the year a decision will be made. The exchanges are trying to keep customers in the loop with what this means for their bitcoins and trading plans. Twenty of the most popular bitcoin exchanges released a statement outlining a plan to deal with this big change for bitcoin. The success or failure of the different blockchains will depend on how the big exchanges coordinate their efforts.
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