What is Bitcoin? And How Do I Invest In It?

September 30, 2021

At Best10Stockbrokers, we provide ample information on the best cryptocurrency trading platforms as well as the best UK cryptocurrency brokers. However, sometimes, even that can be overwhelming as not all of us will have an in-depth knowledge of cryptocurrency. 

For that reason, here, we investigate what the biggest cryptocurrency around is - Bitcoin. We examine how it works, what exactly it is and how to invest in Bitcoin - either with the best platform to trade cryptocurrency (UK wise) or with one of the best cryptocurrency brokers (UK wise again). By the end of this article, you should be armed with all the relevant information to know how to invest in Cryptocurrency as a whole. 

What is Bitcoin?

Bitcoin was created in 2009 and was the world’s first cryptocurrency. A cryptocurrency is a digital currency where the hard asset can never actually be physically held. Instead, Bitcoins are held in a digital wallet. It is possible to buy and trade Bitcoins therefore from your digital wallet. 

They cannot be copied as Bitcoin is based on something called Blockchain technology. That technology creates a decentralised ledger system so that Bitcoins can only be mined or bought and sold - not copied fraudulently. The fact that it is decentralised means that no country or Government controls it. When Bitcoins are mined or traded, any transactions are recorded through Blockchain. This list is public so that no Bitcoins can be traded by people who do not actually hold them. 

How do I invest in Bitcoin?

Investing in Bitcoin is possible in a number of ways. The first, and arguably most complicated, is mining for it. Mining for Bitcoin is done through computers and when completed, new Bitcoins are created. This may sound highly attractive as a means of investing, but Bitcoin mining through computers is a very long process. Computers have to be highly sophisticated as well as run for exceedingly long periods to solve the complex mathematical problems to find or mine a Bitcoin. In fact, sometimes it takes so long and uses up so much energy that it may have been more economical to find other ways of investing in premined Bitcoins. 

And, buying premined Bitcoins is one of the other ways that you can invest in the asset. Doing so is far quicker. To do so, there are three means available to you. Firstly, you can enter into a trade with a seller of Bitcoin through the best trading platform or broker. However, some may find investing in funds that invest in Bitcoin and other cryptocurrencies a less risky way of investing in the digital currency. In fact, it is even possible to invest in funds that have a portfolio of several asset classes - not just cryptocurrency and Bitcoin within that. Finally, you can sell a product to an individual who pays you in Bitcoins. For example, Tesla currently does this for their cars. Purchasers of one of their vehicles can pay for a new car using Bitcoin. 

Other Types of Cryptocurrency 

While Bitcoin is by far the largest and therefore most popular cryptocurrency out there, it is not the only one. In fact, there are countless other cryptocurrencies and it is important to research at least a few of them to ensure that Bitcoin is the right cryptocurrency for you - if the asset class is something that would fit well into your portfolio with the risk profile that you have. 

Knowing about cryptocurrencies as a whole is one of the best ways you can learn how to invest in cryptocurrency UK based or otherwise. For, to put it another way, you would not just choose to invest in a stock just because it was the largest company in the world, would you? You want to make sure it has real growth potential that will be far more profitable than other stocks' ability to grow. It is the same with Bitcoin vs other cryptocurrencies. 

  1. Ethereum

Ethereum is one of the biggest cryptocurrencies at the moment and continues to prove popular. It is highly efficient and run exceptionally well. Trading it is therefore a painless and quick process which can be relied upon to be free from fraud (a worry for many novice crypto investors) Ethereum tokens are called Ether and can actually be used to purchase other cryptocurrencies on Ethereum’s platform.

  1. Tether

Tether falls under the remit of a cryptocurrency group called stablecoins. Unlike Bitcoin, it is linked to an established, real currency or valuable asset like gold. For some investors, that is highly attractive as it gives it a more readily understandable comparison point. Often, that can mean far less volatility than Bitcoins and other digital currencies experience on a day to day and monthly basis. So while the gains may not be quite so big, the losses are usually far lower too. 

  1. XRP

XRP, sometimes known as Ripple, may be a good alternative for those that are not keen on Bitcoin - whatever their reason. XRP has been seen to be a good means of transferring wealth or funds to other investors or to buy goods. Usually, investors in XRP will enjoy low trading fees thanks to the ease that it can be traded. Traditional currency can even be exchanged for XRP so it is attainable for many who previously have found some cryptocurrency difficult to purchase.

  1. BitcoinCash

BitcoinCash was established in an effort to iron out some of the issues that can surround Bitcoin. Given that Bitcoin was the first cryptocurrency on its scale, it does not (arguably) run quite as smoothly as smaller, newer cryptocurrencies around. To match up against new competitors and disruptors on the market, BitcoinCash was created which answers the issues that Bitcoin sometimes grapples with. In short, that is reflected in a far shorter transaction time plus larger trades can be placed in BitcoinCash too. 

Recommended Read: Reasons For Bitcoin’s Volatile Year

Investing In Bitcoin

Bitcoin is becoming more and more popular as an alternative to traditional investment classes. It is not without its disadvantages though of which potential investors should be aware. In the main, many are put off Bitcoin given its high price point and its volatility. All investments can go up in value as well as down, but Bitcoin does so regularly and is particularly sensitive to market news. That may be fine for some individuals of a certain risk profile, while for others it makes it unsuitable.

Rachel Lee
Having worked at Morgan Stanley and BNYMellon for over 10 years in pensions and investments, Rachel now works as a full-time business and financial writer.

Risk Disclosure: Trading in financial instruments involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Before deciding to trade in financial instruments you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. Best10Stockbrokers would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Best10Stockbrokers and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Best10Stockbrokers and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website. Best10Stockbrokers may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

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