Jordi Burgos's avatar

Understand Bitcoin, then do not buy

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What is Bitcoin?

Bitcoin is a new digital currency invented by "Satoshi Nakamoto", it is just a pseudonym. Do not wait to see his picture anywhere, or watch him on the TV.

It is a currency accepted on some on-line services and companies, just like USD are used on USA and EUR on Europe.

Also there is the belief that it is used on drug traffic, weapon traffic and many other illegal activities.

What is worth?

Nothing. Period.

Typical currencies, like Dollar or Euro, are backed by a national bank. Long time ago, a banknote was the promise to pay the bearer an amount of gold. Do not try to go to your bank and ask for your gold. Actually, the issuing govern or national bank guarantees the value of the currency.

So, what guarantees a Bitcoin? Nothing. It is just a invented currency and its value is determined by the offer and demand.

How to get a Bitcoin

An algorithm keeps your computer working for hours/days/months... just to throw a bunch of numbers as result. If this numbers are "correct" you have a new Bitcoin.

As the calculations made on your computer are not used on anything else than creating a Bitcoin, your computer power is wasted.

Watching from another point of view, it is like converting electricity into numbers.

Buy, Sell and Price

There are some exchange markets, like real stock markets, where you can buy and sell Bitcoins with real money.

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The price is just based on the offer and demand. Also on fashion, as it is becoming quite popular lastly. Look at the graphic bellow, it shows the total values from its beginning.

All Bitcoin values

It started as B1 = $1 on October 2010. On October 2013 raised to $1200, the suddenly went down to $700 in 2 days. 2 more days, $1000. And finally (as I write this words), it costs about $650. Look all sudden fluctuations on last days.

Last month Bitcoin values

Conclusion

The bitcoins are created from "the nothing". They are not backed on gold/guarantees as the usual currencies. They worth just as the willing of the people to buy, sell and exchange.

How long it will take to come down to $0.01?

My recommendation: DO NOT BUY, at least if you do not want to highly risk your money due to its high volatility.


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