(Newswire.net — December 3, 2013) — Bitcoin reached a whole new milestone, with the price of bitcoin on Mt. Gox – the world’s largest Bitcoin exchange rising above $1,000.
The price briefly topped the equivalent of $1,000 on Chinese exchange BTC China back on 19th November, but this is the first time investment in Bitcoins has been reached in a US dollar denominated exchange rate.
What is Bitcoin?
Bitcoin is a purely digital currency also referred to as a crypto currency. Its denominations are referred to as bitcoins or BTC for short. It was created by Satoshi Nakumura (a pseudonym) in 2008. Bitcoin is a peer to peer currency that is not controlled or facilitated by any central government, bank or any single entity. It provides anonymous transactions and is being widely accepted worldwide for anything from products at physical stores, online services and more. Anyone can accept bitcoin payments very simply. Using a BTC wallet, the user is provided with a unique transaction code to accept payments.
It could be better to think of its units being virtual tokens rather than physical coins or notes.
With this in mind, as with all currencies its value is determined by how much people are willing to exchange it for.
So how do they come into existence?
Bitcoins are generated by a process called “mining”. Think of it as physically mining for gold, however in this case the mining is computational. This involves a computer solving a difficult mathematical problem with a 64-digit solution.
Each problem solved generates one block of bitcoins, at this time a block is 25 Bitcoins. In exchange for expending processing time, the miner is rewarded with new Bitcoins.
This method of mining provides an incentive for people to provide computer processing power to solve the equations.
Each time a block is generated the difficulty of the problem is adjusted to compensate for the growing power of computer chips, as well as the increasing number of miners, to ensure a stream of approximately 3,600 new bitcoins per day.
At the time of this article there are over 12 million Bitcoins in existence.
To exchange bitcoins each user must have a Bitcoin address, a string of 27-34 letters and numbers, which exists as a kind of virtual postbox from which the bitcoins are sent and received.
Bitcoin is anonymous
No registry exists of these addresses which personally identifies people. There is however a history of all transactions called a blockchain, the blockchain is publicly available.
The Bitcoin addresses are stored in wallets which are used to receive and send the coins.
In many ways they operate like privately run bank accounts, with the exception that if the data is lost, so are the bitcoins owned.
Make Money with Bitcoin
There are really only two was to profit with bitcoin. The first is mining, as mentioned earlier this is the computational process with which bitcoins are generated into the currency. However mining is now big business, with companies scrambling to make ever increasing hardware speed improvements to a very hungry audience. However this has 2 major problems.
Firstly, all of the big players providing the hardware are fully booked up with pre-orders, the earliest you can buy a decent system is now around January 2014.
The up front costs are now running into the thousands for a system and will be profitable for up to approximately 1 year. Powerful systems such as the TerraMiner II -1TH/s, ASIC Miner are under pre order for $3,599. Experts state if actually delivered sometime in January, will pay for itself in a matter of days.
Most people would agree that this sounds fantastic and very profitable. But there is one major hiccup; It must be noted that these are dedicated bitcoin machines and will be useless within a year as the difficulty of the bitcoin algorigthm difficulty increases.
However there is the second method to profit from bitcoins – trading. Trading has all the benefits and none of the downsides. The most important of which is that mining suffers from a large up-front investment, with trading it is perfectly profitable with an investment in Bitcoins of only $100. Secondly, mining has a decreasing level of profitability, trading bitcoins will always be a part of bitcoin. Finally and most importantly, bitcoin trading works whether the value of a bitcoin goes up or down.
Getting Started
Bitcoins can be traded on Exhange websites. Before you get started, you’ll need to buy the bitcoins themselves, there are many sites to purchase them from but the most popular is LocalBitcoins.com which provides a list people in your local area who sell bitcoins via bank transfers, moneywires or even in person if you are uncomfortable with providing bank details and retaining internet anonymity. It is recommended you register there first, for more information subscribe with your email address at the top right of this article to receive a free full e-book loaded with all the information you’ll need to begin trading.
As bitcoin is trading 24/7, how do you maximise your profit? Do you really want to be awake all day to make take advantage of the price fluctuations? Just like Forex, the price of bitcoin changes by second. There is only one method to make sure you don’t miss out on large trades and that is automation. If you’ve been involved in Forex you have probably heard of Forex trading robots. A group of clever programmers have done exactly that. A fully automated trading system which can run on your PC/Mac or even on a server hosted for you, ensuring completely uninterrupted trading. For more information subscribe at the top right of this article.