Bitcoin has gained massive mainstream traction thanks to its immense growth in 2017 and now it's all time high in December 2020. It's the new gold rush, with people around the world flocking to various cryptocurrencies in an effort to get their share of the digital currency pie.
However, it's not something people should just enter without knowing a bit more about.
Here are a few things everyone should know about this star currency:
1. It's Largely Unregulated
One of the most appealing things about Bitcoin and other cryptocurrencies is its anonymity. Transactions might be readily available and public, but no one really knows who they're trading with.
This can cause some moral issues down the line, especially since it's largely unregulated.
Anyone looking to take the leap should be aware of the ethical and legal risks that they're incurring.
2. Bitcoin is Worldwide
One of the problems facing cross-country transactions is the change in value across currencies, as well as the logistical problems involved in such money movements. This is something Bitcoin solves handily.
Since it's not beholden or limited to a single country, it can be traded across borders without too many complications.
If both parties have a crypto wallet, they can work with each other.
3. There is No Boss
No single company or entity owns Bitcoin or any cryptocurrency. Anyone can use it, but no one commands it. No one can usurp your control of your coins without some form of theft or fraud.
All the power is in the user's hands, which while enticing, can also be stressful.
4. It's Still Changing
How Bitcoin is being traded and where it's legal to do so changes daily.
The fact that it lacks regulations is also something that might change overnight, which will likely directly impact its value.
This is something all would-be investors and traders should know, because the practices they assume will hold up over time likely won't.
5. It's Hyper-volatile
The most exciting thing about Bitcoin is its spectacular rise in value over the course of a year. However, what most people forget when singing its praises is that its value is just as likely to fall as it is to rise.
It's so sensitive to news that even rumors of additional regulations can cause it to drop in value.
Those who want to enter these waters should know that they'll need nerves of steel to make smart trades and get out on top.
6. Trusted Exchanges Are Where Most Trades Happen
The first question people will ask will likely be where they can actually purchase Bitcoin or other cryptocurrencies. The answer is in exchanges.
There are plenty of websites online that for a nominal fee will handle both storing and trading currencies for them. Those same sites are also responsible for the initial purchase.
While peer-to-peer trading is entirely possible and is partially the point of Bitcoin, it's not recommended for newcomers.
As with any new technology, scams are everywhere, and peer-to-peer transfers are where they will often occur.
7. Transactions Cannot Be Reversed
In Bitcoin, transactions cannot be reversed.
This is important. People cannot cry foul if they make a mistake or send something to the wrong person or company. What's done is done.
8. It's Not Entirely Anonymous
Anonymity is one of the big selling points for Bitcoin, and to a certain extent, it's a legitimate selling point.
For the most part, people won't know who they're dealing with. However, users can still be identified through their Bitcoin address.
Many users opt to use disposable addresses to keep their identities safe from hackers and other untoward individuals.
9. Wallets are Vulnerable
With the situational exception of hardware or physical crypto wallets, all wallets are vulnerable to a multitude of issues.
Wallets held by exchanges, for example, function as much as the exchange does. Should the parent company collapse suddenly, so does the functionality of the wallet.
Any attacks on those exchanges can also leave any wallets they hold vulnerable to theft.
Even physical wallets are vulnerable if plugged into a compromised device or worse, simply stolen.
10. Bitcoin is Not the Only Valuable Cryptocurrency
While Bitcoin might be the poster boy for cryptocurrency, it's far from the only one that's rapidly gaining in value.
Ethereum and Ripple are both poised to strike hard, along with numerous other smaller currencies. Savvy traders will study which ones are ready to pop and focus their energies on them.
Bitcoin and cryptocurrency as a whole is an exciting new world for traders and investors alike. However, it's also brand new, which means understanding of it is generally shallow. Those who want to join the club should take the time to learn the ropes before committing fully.