OPINION: 10 Things You Need To Know About Bitcoin
When bitcoin was born in 2009 after the financial crisis, the goal of early investors was simple — participate in a currency market that wasn’t beholden to the whims of central banks.
But in the intervening years, the boom in other digital “cryptocurrencies” like ethereum and litecoin has enticed day traders and momentum investors who simply want to buy something that’s going higher in a hurry.
While bitcoin BTCUSD, +1.78% has been around for a while, there is still plenty of confusion about what it is. That only increased this week after bitcoin “forked” into two different currencies as a result of disputes over transaction speed, security and other issues. Now there’s old bitcoin and Bitcoin Cash, which rocketed on its first day.
My colleague Brett Arends says cryptocurrencies are garbage and warns you to stay away. But just a few weeks ago, Twitter star and wealth manager Josh Brown admitted he was diving in to the cryptocurrency craze even as he admitted not fully understanding the currency’s use or where it will ultimately wind up.
And, of course, there’s the recent record highs of about $2,800 for the value of a single bitcoin — up dramatically from $100 in 2013 and a low of just $500 a year ago.
But will bitcoin — or any of its imitators — last? And should regular investors give this “asset” serious attention, or consider it a short-lived quirk of the market?
For the record, I don’t think bitcoin is a fad, even if it has its flaws. It’s dangerous to roll your eyes at a technological advance simply because it’s different and you don’t fully understand it — as is proven by this 1995 piece scoffing at the internet or this classic TechCrunch prediction that “the iPhone will bomb.”
But it’s fair to say that while there have been big strides for bitcoin over the last few years, the digital currency may be at an inflection point in 2017. Not only does it face competition from other cryptocurrencies, but it also seems to be a source of tension from within the bitcoin community itself.
So what’s up with bitcoin, and is it worth your money?
Both proponents and detractors are very strong in their opinions. But for those still in the dark about bitcoin, here are 10 things you need to know before you consider investing:
The good news about bitcoin
Bitcoin is a real currency. Those who think bitcoin can’t be used to buy anything real are either stuck in the past or just spreading misinformation. Many independent businesses accept bitcoin, but even some big brands are getting in on the act, including a Pennsylvania Subway restaurant and software giant Microsoft Corp. MSFT, -0.44% It simply isn’t true that you can’t use cryptocurrencies to buy actual stuff.
Bitcoin transfers are fast and flexible. While many financial institutions charge you or take days to process transactions, bitcoin allows transfers from one account to another almost for free and at will. You must have some technology, of course, and you must already have your money in bitcoin form. But there are no middlemen, and users are able to transfer value more quickly and without costly processing fees.
Digital currencies are here to stay. While bitcoin isn’t perfect, its potential has won over many of the biggest names of Silicon Valley and Wall Street. Icons from Bill Gates to Richard Branson to Mark Cuban see potential — at least in the concept and blockchain technology behind bitcoin. Even if volatility in bitcoin prices is the norm and competition is heating up, there clearly is a future for digital currencies in some form.