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What is Bitcoin?

Bitcoin is a digital currency and a payment system. It provides users the ability to instantly send and receive money to/from anywhere in the world.

A Bitcoin can be divided out to eight decimal places. The smallest amount of Bitcoin you could transact is 0.00000001 Bitcoins also referred to as 1 satoshi (named after the pseudonymous creator, Satoshi Nakomoto).

Bitcoin is a decentralized network. This means that no single person or entity controls Bitcoin. Bitcoin is “controlled” by its network of users and miners.

The price of Bitcoin is constantly fluctuating and is determined by open-market bidding on exchanges, similar to stocks or gold.

How Does Bitcoin Work?

Bitcoin operates on a technology known as “blockchain”. The blockchain is a publicly controlled digital ledger that records every transaction ever conducted on it from inception to present in what are referred to as “blocks”. If you’d like to learn more about blockchain, click here to read my article about it.

Why Invest in Bitcoin?

There are a lot of reasons to invest in Bitcoin. I’ve distilled this discussion into 3 categories.

  • (1) Bitcoin as a store of value
  • (2) Decentralization
  • (3) Bitcoin Vs. fiat currency

(1) Bitcoin as a Store of Value

  • 1. There is a limited supply of Bitcoin
  • 2. It costs money to create Bitcoin, making it inherently valuable

1. Bitcoin has a total supply cap of 21 million, there can only ever be 21 million Bitcoins in existence. It is estimated that we will reach the cap around the year 2140. However, 99% of all Bitcoins will be mined by the year 2032 (much more relevant to us now).

2. As of this writing (October 2017), it costs approximately $1,000 for a mining company to create 1 new Bitcoin. Like gold, Bitcoins cost something to “produce” or “find”, this creates an inherent value for the asset.

(2) Decentralization:

Blockchain technology allows Bitcoin to operate in a trust-less and decentralized fashion. This means that the security of your Bitcoins is in your hands. Once you understand a little bit about how Bitcoin works, you’ll realize that as long as you keep your private keys in a secure location (or on a secure, offline device – see links below), you’re in complete control of your Bitcoins.

A centralized organization can’t take them from you, inflation will not affect your purchasing power over long-time frames and you can instantly send and receive money over any borders and without a centralized third-party.

(3) Bitcoin vs. Fiat Currency:

Quality Bitcoin Fiat Currency
Supply Bitcoin has a limited supply (21 million). The supply will never be higher than 21 million Bitcoin. This means that once all Bitcoins are in circulation (appx. 99% in 2032) a deflationary effect will occur. Since Fiat currency has no real backing nor a limited supply, it can be created at will by the government controlling it. This causes massive issues of inflation (i.e. the USD).
Utility Usable as a means of exchange. It’s value hinges on the amount of users in the network. Usable as a means of exchange. It’s value hinges on the strength of the government backing it.
Fungibility Currently, Bitcoins are fungible. However, some individuals can reject certain coins if they are deemed “tainted” from past transactions. Most Fiat is fungible.
Transferability One of the main selling points of Bitcoin is its transferability. Bitcoin knows no borders and can be digitally transferred to anyone in a matter of seconds. Fiat currency can be transferred digitally without too much hassle, however, you’re likely to incur substantial fees and wait a few days for centralized clearing.
Counterfeit Protection Nearly impossible to counterfeit as the blockchain is immutable and the history of every transaction and unit can be traced back to the beginning. Theoretically, a 51% attack could allow double-spending of coins; however, this is a highly unlikely scenario. Counterfeiting occurs on a highly regular basis and has a very long history of doing so, especially in terms of paper money.
Storage Storing Bitcoins is now “relatively easy.” Technological advances and startups are making it easier to store and spend Bitcoin, but in its current state, the average individual needs to do quite a bit of research to securely store their Bitcoin. Storing Fiat is easy through centralization or even stuffing paper money under your mattress.
Transportation Easy since Bitcoin is a digital currency. Hard wallets can fit in your pocket. Software wallets can be installed on your phone. Debit cards are now becoming available as well. Relatively easy. Taking money across borders (especially in large sums) can be a hassle. Converting to foreign currencies can also be a hassle.
Security Depends on how the Bitcoin is stored. Knowledgable users will store the majority of currency in cold storage, which is very secure. Hot storage is about as secure as fiat currency. Depends on how fiat is stored. Money under the mattress is subject to physical destruction and theft, money in the bank is subject to hackers (similar to hot storage of Bitcoin).
Centralization Bitcoin is decentralized by nature. There are ways to store money in a centralized way (i.e. Coinbase) but it is also easy to stay completely decentralized and be in control of your own keys/currency. Fiat Currency is controlled by a system of centralization. The people are typically not in control of their own money, centralized instituions, governments and banks are ultimately in control.

Buy Levels:

Target buy levels are subject to change. I update these levels once market changes demand it.

Last Updated: 10/18/17

Recent Trades:

This section briefly lists what price I bought/sold at. Every coin listed on my watch-list are, in my opinion, anticipated to be long-term winners; however, I often sell portions of my portfolio according to a set of rules dictated in my overall strategy and then buy back the same currencies when the price drops to my buy levels. (A full write-up of my strategy will be linked here when it becomes available on the site). 

2017 Q3

September 15, 2017 – Bought at $3674.65 per BTC

August 26, 2017 – Bought at $4321.39 per BTC

2017 Q2

June 26, 2017 – Bought at $2432.05 per BTC

June 5, 2017 – Bought at $2797.54 per BTC

May 26, 2017 – Bought at $2342.24 per BTC

Relevant Links/Tools:

See Bitcoin on Coin Market Cap – Coin Market Cap is one of the best resources for cryptocurrencies in general.

Blockexplorer.com – an open source web tool that displays information about blocks, addresses, and transactions that occur on the Bitcoin Blockchain.

The original Bitcoin whitepaper is a great way to fundamentally understand Bitcoin as a currency and the technology behind it.

If you’re storing Bitcoin on a centralized exchange or third-party (i.e. Coinbase, Bittrex, etc.), your Bitcoins aren’t as secure as they probably should be. I prefer to keep the majority of my Bitcoins in what is considered “cold storage” on a hardware device. My preferred device is the Trezor.