Bitcoin is back in the headlines after soaring in value. One bitcoin is currently worth R158 511.17 and seems to be increasing by the hour.
In countries that accept it, you can buy groceries and clothes just as you would with the local currency. Only bitcoin is entirely digital; no one is carrying actual bitcoins around in their pocket.
Bitcoin is divorced from governments and central banks. It’s organized through a network known as a blockchain, which is basically an online ledger that keeps a secure record of each transaction all in one place. Every time anyone buys or sells bitcoin, the swap gets logged. Several hundred of these back-and-forths make up a block.
The price of bitcoin has been rising steadily over the years, and as it becomes more mainstream, more and more people are eager to invest in the technology. Long term investors in bitcoin have really benefited from the price increases, and going forward, the future looks very bright.
Nobody knows what the price will be in the next hour, let alone the next year, so it is a high risk investment. What we do know is the past performance of bitcoin, as shown in the table below.
Investors are drawn to bitcoin, when they see that in the past it has been possible to make very good returns. Investing a year ago today would have given you a 900% increase in value of your bitcoin investment. Even an investment 1 month ago, would have got you a 250% increase in value.
Tread carefully when investing in bitcoin though, as past performance of bitcoin is not a prediction of future results either! Once again, nobody knows what the price will be in the future.
For investors, bitcoin is the new gold
Bitcoin is sometimes referred to as ‘digital gold’, or ‘gold 2.0’, and a lot of similarities to gold. People buy gold as an investment for the future, and similarly investors also buy bitcoin, in the belief that it will appreciate in value in the future.
For centuries gold has been seen as valuable all around the world and now that bitcoin is around, it too is starting to be seen as a store of value due to its usefulness and scarcity. Like gold, to invest in bitcoin, usually means to buy bitcoin and store it safely and securely, in order to sell it at a future date for a profit. Some people might keep Kruger Rands in a safe as an investment, while other keep bitcoin wallets.
“The simplest way that the average person can invest in Bitcoin is to buy some on a bitcoin exchange.”
Bitcoin is divisible like gold is, which means that if you want to buy some gold, you don’t need to buy an entire gold bar, you can buy some gold to the value of how much you would like to spend. Bitcoin works the same way…you do not need to buy a whole entire bitcoin, you can buy bitcoin to the value of the amount you would like to spend. If you want to buy bitcoin to the value of R100, R1000, or even R1 million, you can do that.
At today’s current price of bitcoin of R158 511.17 for one bitcoin.
What is the minimum investment amount?
There is no real minimum amount when it comes to bitcoin, but to see any real return on your investment, you should invest enough to make it worth your while. Since the price of bitcoin is volatile, it is not recommended to invest money that you will need desperately in the foreseeable future.
Most people agree that to see the best benefits, a bitcoin investment should be considered a long term investment.
“People often see the price of bitcoin and worry that it is too expensive to invest in, but the reality is you don’t need to buy a whole bitcoin, you can buy bitcoin to the value of the amount you can afford to spend.”
Buying bitcoin over time
The bitcoin price volatility has been steadily decreasing over the last few years, but even so, a single large investment into bitcoin is not always the best choice, often it can be wiser to invest a smaller amount at regular intervals.
Investors in bitcoin often use a technique known as ‘Dollar-Cost Averaging’ (DCA) to protect themselves against fluctuations and downside risk. They do this by buying fixed amounts of bitcoin on a regular schedule, regardless of what the price is on the day. So as an example, you might buy R5000 worth of bitcoin, regardless of price of bitcoin, on the first day of every month.
This would mean that you would purchase more bitcoin when the price goes lower and less bitcoin when the price goes high, but always the same fixed currency amount that you have decided on.
How much money will you make?
Nobody can predict the future, and since bitcoin trades like a commodity, it is possible for you to make a great profit, or a huge loss, depending on when you buy and sell your bitcoin.
“There is no spreadsheet or table of earnings with bitcoin, or any monthly income from investing in bitcoin. Beware of any website that offers you guaranteed profits, tables with profits or a monthly income from investing!”
Just like if you buy some gold for an investment, there is no monthly income from that, or table predicting your profit. The market prices change based on supply and demand, and your profit will depend on when and at what price you buy and sell your bitcoin.
“Beware any bitcoin system or website offering guaranteed returns, it is more than likely a scam or ponzi scheme, stay away!”
What is a bitcoin exchange?
A bitcoin exchange is a website that facilitates the process of exchanging your Rand for bitcoin with other users. If you want to invest in bitcoin, the best place to do that is at a bitcoin exchange.
On a bitcoin exchange you are not actually buying the bitcoin from the exchange itself, you are instead trading with other users such as yourself, who are putting their bitcoin up for sale. The exchange acts as a middleman, ensuring that sellers get their Rand, and buyers get their bitcoin.
You cannot get scammed by another bitcoin trader on a bitcoin exchange, you do not know who you are trading with, and have zero communication with the other traders. Traders use bitcoin exchanges to trade bitcoin like Forex 24/7, but for investment purposes, you would just use the exchange to buy your bitcoin when investing, or sell your bitcoin when divesting.
How to safely store your bitcoin investment
Once you have bought your bitcoin on a bitcoin exchange, it is wise to withdraw it from the exchange and store it securely offline. If you are purchasing bitcoin regularly to put towards your investment portfolio, you can withdraw each time that you make a purchase to your secure wallet.
Bitcoinzar highly recommends that you invest in a secure bitcoin hardware wallet to store your bitcoin offline.
They offer secure bitcoin hardware wallets for sale in the form of the Trezor and Ledger wallet.
To find places where you can buy bitcoin in South Africa, you can see a list here:
https://www.bitcoinzar.co.za/buy-bitcoin-in-south-africa/
To see a list of bitcoin wallets you can use to store your bitcoin, you can read this page:
https://www.bitcoinzar.co.za/get-a-bitcoin-wallet/
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