Cryptocurrency and more, specifically speaking, bitcoin, is a trend that has taken over the world in many different ways. For a lot of people, it has become one of the best forms of investment ever, while for others, it might not have been as profitable as they initially thought it would be.
Still, the temptation is too great, even more considering that there are stories of people making big profits thanks to bitcoin. Some people even consider a bitcoin retirement, which might be very effective if done correctly, but because of the nature of cryptocurrencies themselves, it can be more complicated than some people think.
This article will cover some of the basics of cryptocurrencies, bitcoin, and why they can be great retirement plans, but with some risks involved. To understand how bitcoin might be a good retirement option, we first need to understand some of the basics regarding cryptocurrencies.
Getting to Know Cryptocurrencies and Blockchain
Simply put, a cryptocurrency is a form of digital currency with a lot of security parameters that are nearly impossible to countermeasure. These digital currencies are decentralized since they are created through the use of a complex network of computers taking advantage of blockchain technology, a very specific type of database secured by complex processes and equations that require the use of a computer to be solved.
All transactions involving cryptocurrencies are frequently registered in this database, which starts a process in which the computer solves these equations, and the digital currency is created. Although the creation process depends on each specific currency, this is the general method in which they are created.
If you are interested in more details, you can check out this article over here https://www.investopedia.com/terms/c/cryptocurrency.asp.
One of the most famous (or infamous, depending on who you ask) cryptocurrencies out there is, of course, bitcoin, just because of its insane value in the current market as a form of digital currency, as well as its extreme volatility and the way its prices shift considerably overtime.
What Decides Bitcoin’s Value
Things get complicated when we dive into cryptocurrencies with a more economic-based mindset, and one of the most frequent questions regarding it is how their prices are decided. When it comes to bitcoin, we can say that the same rules apply to it as they apply to other digital currencies. First of all, the main factors that can influence its value to a certain extent include:
- Scarcity: How rare or difficult it can be to obtain
- Divisibility: How easy it is to be divided into smaller amounts so that it can be used more comfortably
- Utility: Its overall usefulness
- Transportability: How difficult it is to be transported or moved around
- Durability: How durable it can be
- Couterfeitability: How easy it can be plagiarized or pirated
The main reason why bitcoin is actually valuable is that it performs very well when it comes to these factors. Although it is fairly difficult to obtain (which is one of the reasons it is so valuable) it is not at all scarce, can be easily divisible, has a lot of utility, is very durable, and easy to transport because it is a digital currency, and cannot be plagiarized or pirated in any way.
Overall, bitcoin is used because of its untraceable and private nature. Since it is uncentralized, it cannot be tracked by a governmental or financial organization, and of course, this also means that it can be used for illegal reasons.
However, a lot of people used it as a form of investment, to change it to other currencies, and to purchase certain products or services without leaving tracks behind.
Bitcoin as a form of Retirement Investment
The biggest issue when it comes to investing in bitcoin is that, although it can be predicted to a certain extent, it is still a very volatile form of currency tied with way too many things that can influence its value. Just so you know, there was a time that a single bitcoin was valued at $19,000 USD, but it dropped to $7,000 in the same year.
Nowadays, one single bitcoin is valued at almost $32,000, but it dropped its price from $50,000 in less than a year as well. The saddest thing about this fluctuation in its value is that it was mostly because of one single person, Elon Musk, and his Twitter account.
Now you can tell why some people are reluctant to give it a try. There are indeed people who benefitted from its volatility, but there’s a lot of people who lost money because of it. I would dare to say that its value is highly influenceable, and that makes it a not so reliable form of investment.
However, the best way to approach the process of investing in bitcoin is by understanding the things that can influence it, and making sure that your investment is long-term, just because of the chances of it decreasing and increasing its value over time.
Ideally, you should make sure to invest money that you won’t actually need, and slowly but steadily increase that investment until the point you have saved a considerable amount of money. Once you have made a considerable profit from it, it is actually recommended to not be greedy and get it converted into your main currency until its value decreases. Thankfully, there are a lot of service providers out there that can guide you through the process of making said investments, so you can rely on them in case you are having doubts about it.