When two friends are having a conversation about investing and money and one of them mentions “Bitcoin,” the direction of what the two people might talk about can go a few different directions. One of those directions could easily go in towards.
“Oh, what’s Bitcoin?”
“I’ve heard about that!”
The latter will also likely lead into the discussion about how volatile the price of Bitcoin has been. From the historical price rise past $1000 to the Mt. Gox scandal which caused an equally share decline in price. News about something like digital currency might seem too good to be true or far fetched to many average investors, but since Satoshi Nakamoto’s white paper was released in 2009, there’s been plenty of proof that digital currencies do work, do hold and often times increase in value and some of them actually have some real merit behind them as investment vehicles.
However, for those just getting involved at the beginning, the learning curve to be knowledgeable and feel confident buying and trading digital currencies can be steep. It’s especially daunting when newbies come into digital currencies to learn about Bitcoin and once they’ve figured out how to set up their wallet, send, receive and even purchase Bitcoin, they realize that there are seemingly endless alternative currencies (alt-coins) out there.
Take your wading into the world of digital currencies slow, cautiously and with an open mind. It’s a great thing that Bitcoin exists for the world. Read the white paper by Satoshi and that’s clear. It’s also a good thing that so many alt-coins have been established as legitimate competitors to Bitcoin. When the price of Bitcoin swings wildly, like any digital currency can potentially do, there are options to hedge your investments and safeguard them against too major a loss of value in the markets.
Once someone is ready to invest and use digital currencies in their personal finances, they need to actively educate themselves or find resources to help them understand the differences between the top digital currencies, what they are used for and why exactly they are valuable. We’ve all heard of Bitcoin by now, many of us heard of Ethereum as well in the early part of 2016 as it received a lot of hype in the news about it being the next big competitor to Bitcoin as its market cap surpassed $1 billion.
However, many people don’t make the distinction that while Ether, the digital currency which fuels the Ethereum World Computer, does much, if not more than what Bitcoin is capable of, it’s wasn’t built to be so much as a transactional peer-to-peer currency as Bitcoin and other currencies like Dash and Litecoin were. Some digital currencies are inherently built to be excellent stores of value in peer-to-peer transactions. Other digital currencies might be able to constitute a store of value, however, they might also be fuel sources for blockchain powered systems. It’s extremely important to be aware of this distinction.
These and numerous other factors lead to the ultimate conclusion that putting all of one’s eggs into one basket, even if you believe strongly in one digital currency over another for good reason, might be foolhardy. The digital currencies markets are notoriously volatile, and while there are lots of opportunities to invest and make handsome returns on investment, doing so with discretion and and prudence with the help of an expert is probably the best bet for consistent and long term returns.