Bitcoin is a form of cryptocurrency that has caught the fascination of large organisations and individuals alike. Today, trading in bitcoin is normal in various countries and organisations such as Tesla Inc and Paypal have announced that they are open to receive bitcoin payments, making it rather intriguing for ordinary people.
Despite consistent efforts from Indian government to impose a blanket ban on cryptocurrencies, they are here to stay at least for now. But the most vital point is to be prepared for pretty quick highs and lows in the value of bitcoin. While some feel bitcoin is the future, others brush it off as a bubble. Whichever is the case, bitcoins are fast gaining acceptance, shares astro strategist Hirav Shah
What is Bitcoin – the term that has changed the way the world hitherto looked at ‘currency’. Despite the worldwide interest it generated, there are still many fundamental questions that the term throws up.
Just a few weeks back, Tesla chief Elon Musk tweeted in support of Bitcoin and his firm Tesla invested $1.5 billion in Bitcoin. It is also believed that Musk procured 43,000 bitcoins through January 2021. The transaction impacted his company’s worth which rose to 1 trillion dollars for the first time.
Not surprisingly, there was a massive jump in Bitcoin prices as well. The cryptocurrency crossed the $58,000 per unit value for the first time, which was double the $29,000 it cost towards the end of January 2021. In fact, Tesla Inc also announced that it was ready to accept cryptocurrency as a mode of payment for its electric cars and Elon Musk looked like one of the biggest supporters of cryptocurrency.
Then something happened that made Musk lose a whopping $15.2 million in a day, overthrowing him as the world’s richest man and Tesla Inc’s shares fell by 8.6%. This was all due to a simple, but rather impactful tweet by Musk himself. This time, Musk tweeted that the prices of Bitcoin and smaller rival Ether ‘do seem high’. And this was just two weeks after Tesla Inc added $1.5 billion in Bitcoin. This brought the price of Bitcoin value down to $53,000. But those in favour of Bitcoin maintain that Bitcoin is bound to recover as it did in the past few months.
Bitcoin Meaning in the financial world
For those uninitiated, Bitcoin is a cryptocurrency invented in 2008 by an unknown person or group of people that go by the name of Satoshi Nakamoto. The currency was first used in 2009 when its implementation was released as open source software. Bitcoin is a digital currency to explain it in the simplest form. But it is also a virtual currency. Bitcoin is based on cryptographic algorithms due to which it is referred to as cryptocurrency.
As per European Central Bank, the decentralisation of money offered by bitcoin has its theoretical roots in the Austrian school of economics. Friedrich von Hayek in his book Denationalisation of Money: The Argument Refined advocates a complete free market in the production, distribution and management of money to end the monopoly of central banks.
Each bitcoin is primarily a computer file stored in a digital wallet app or a smartphone or computer. People can send bitcoins or part of one to another’s digital wallet and can receive bitcoins from others. Every single transaction is recorded in a public list called the blockchain.
And it is this facet of bitcoin that garnered remarks from Tesla Inc chief Elon Musk. He famously went on to say or rather tweet that, “An email that says you have gold is not the same as having gold. You could also have cryptocurrencies. Money is just a piece of information that allows us to avoid the inconvenience of bartering. That data, like all data, is subject to latency and error. The system will evolve toward that which minimizes both.”
How to earn bitcoins?
To start mining for bitcoins, one has to have an own mining rig. At the beginning of Bitcoin history, miners used ordinary computers, later they shifted to graphic cards and now they are mined by specific hardware designated just for mining bitcoins.
It is called ASIC or Application Specific Integrated Circuit Chips, uses less energy and mines bitcoins much faster. Goes without saying, this device is expensive, though its speed is astonishing. The most powerful machines can solve as many as 14 terahashes per second. This means, it does 102 attempts in a second to solve a block and developments happen constantly.
Choosing an ASIC mining rig
Before starting mining, one has to concentrate on various parameters such as performance or hash rate, consumption of electric power and price. It is best to go through miners’ reviews and choose the most appropriate one.
Bitcoin mining means a lot of electric power consumption and a special place for mining rigs that are both noisy and emit a lot of heat. The best way to deal with this is to place your machine at a professional data centre and be free of all such concerns.
Getting a Bitcoin wallet
A bitcoin wallet is where you will receive bitcoins and will be able to manipulate with them. In short, bitcoin wallets help you to manage bitcoin addresses, while bitcoins themselves are technically stored in the block chain. Each bitcoin has a public and private key. The public key like your bank account number is a combination of unique characters. You will use this key if you want to receive bitcoins from somebody. Every bitcoin address is public and one can trace back every transaction that passed through it.
The private key on the other hand serves to send transactions. This is strictly confidential and if you lose your private key, you are bound to lose bitcoins placed in that particular address forever.
The option for beginners is to go for a software wallet, though there are different types of wallets. It is easy to manage and suitable for frequent manipulation with mined currency. There are two kinds of software wallets – full ones that download whole blocks of blockchain or light-weight wallets that store only relevant transactions.
Full ones use a lot of space and memory in your computer, but are safer. On the other hand, light-weight ones are connected with blockchain managed by a third party and one cannot fully control it. In case one wants the full version, then they can download the original Bitcoin Core.
For example, if you want to buy a sofa from XYZ valued at $1300 and the current bitcoin price is #13,000, then you will have to send 0.10 bitcoin to XYZ for the purchase. No credit card or bank is involved in the transaction.
Join a mining pool
Mining bitcoins on your own may not be profitable always as one single machine cannot compete with large mining firms around the world. So, it is best to join mining pools. Miners provide their computing power to a group and when bitcoins are mined, the gain is divided among the members. Surely, the income is lower, but it is regular.
However, members of the pool will have to pay a fee to an operator of the pool and this fee is usually 2% of the received reward. As soon as one chooses a mining pool, one has to register on its website and set up an account. Later, one receives a worker ID.
Mining programme for your computer
Once done with having hardware, a bitcoin wallet and having chosen a mining pool, it is time to get mining software to run on computers. It connects one to the blockchain and bitcoin network. Mining software delegates work to miners, collects complete results and adds all information back to the blockchain.
Also, one gets info on temperature, cooling, hash rate and average mining speed. There are a whole lot of free programmes to mine bitcoins. However, the best ones run on all operational systems and each has its own advantages and disadvantages. Some mining pools have their own software.
Final step, start mining
At this stage, you are ready to start mining and earning bitcoins. Fill in the information about your wallet and mining pool into the mining software, choose a device and begin mining.
What is Blockchain
In simple terms, blockchain is a specific type of database that stores information in blocks that are then chained together. As new data flows in, it is entered into a fresh block and once the block is filled, it is chained onto the previous block. This keeps the data chained together in chronological order. Though different kinds of information can be stored on a blockchain, the most common purpose so far has been as a ledger for transactions.
When it comes to bitcoins, blockchain is used in a decentralised way so that no single person or group has control. All users retain collective control. However, it has to be remembered that blockchains are immutable in the sense that data entered is irreversible. In case of bitcoins, transactions are permanently recorded and viewable to anyone.
However, private and centralised blockchains where computers are owned and operated by a single entity, do exist.
In a blockchain, a node has a record of all data stores on the blockchain since its inception. For bitcoin, the data is the entire history of all bitcoin transactions. If a node has an error, then thousands of other nodes cross-reference and easily point out the error. Similarly, the node can correct itself using thousands of other nodes as reference points. This system helps to keep exact and transparent order of events.
It has to be remembered that bitcoin protocol is built on blockchain. In a research paper about digital currency, Bitcoin’s anonymous creator Satoshi Nakamoto referred to it as “a new electronic cash system that’s fully peer to peer with no trusted third party.
How to do Bitcoin Trading
To begin with, learn what moves bitcoin’s price. Given that it is a subject that is evolving fast, reading up on it is ideal for any miner to stay ahead in the game. Then pick a bitcoin trading style and strategy. Choose how you want to get exposure to bitcoin. Decide whether to go long or short. Set up your limits and stop. Open and monitor trade and close your position to take a profit or cut a loss.
The easiest way to invest in bitcoins is to invest in Crypto Exchange. Many exchanges in India facilitate bitcoin transactions for their users. All one needs to do is to sign up with an exchange of one’s choice and complete the KYC process. This involves verifying details such as PAN, Aadhar, etc.
Bitcoin is a new form of currency that many want to use to stay anonymous while paying for products and services. Some people believe bitcoins value will grow over time and once people and businesses start using them. For now, people buy bitcoins as an investment vehicle and some because they are frustrated by central banks and financial institutions.
As mentioned above, cryptocurrency marketplaces, online websites or apps, called cryptocurrency exchanges allow people to buy and sell bitcoins using different currencies. One can buy bitcoins using local currency and start buying and selling bitcoins like any stock trade.
When one opens an account, one gets a digital address and that address is the identity to buy, sell or pay in bitcoins. Some top cryptocurrency exchanges are listed below:
Risk involved in bitcoins
Bitcoin is a virtual currency and has no tangible value. This means that you cannot hide them in your closet and use them when in need. Also, bitcoins are not accepted anywhere, though organisations like PayPal have announced that they accept bitcoins. Another downside is that the price of bitcoins fluctuates a lot. Even if the value of bitcoin shoots up, it could fall equally fast in a matter of hours.
Though bitcoins are considered to be a bubble by some experts, bitcoin wallets are targeted by hackers who are interested in profits of the increasing prices.
Who own bitcoins
Bitcoin is not owned by a country, group or person. Bitcoins are owned by users of bitcoin. At the outset, new bitcoins have to be mined and the miners get some bitcoins and these are later sold to other people. Many large institutions and crypto leaders have invested heavily in bitcoins. It is said that 4% of people own 96% of bitcoins.
Bitcoin price prediction
Citi analysts predict the price of bitcoin at the range of $300,000 at the end of 2021. According to Stock-to-Flow (S2F), a bitcoin price prediction system, BTC/ USD will reach $100,000 by December 2021. Analyst Mike McGlone from Bloomberg sets a goal of $50K in 2021 and $170K for 1 BTC in 2022.
Bitcoin could be worth $325,000 at the high range and $17,000 at the low range. In 2022, the high could be $275,000 and low could be $42,000. It would be $145,000 in 2023 and hit a low at $63,000. In 2024,’25, a bitcoin could be valued at $1,000,000 at the high mark and $275,000 at the low point.
Bitcoin current price in USD, INR
As of March 8, 2021, 1 bitcoin equals 37,27,439.50 in Indian rupees. It equals $50,827.60.
Bitcoin historic price
The world’s oldest and biggest digital asset, bitcoin is synonymous with cryptocurrency. Created in 2009 by a person using the alias of Satoshi Nakamoto, the digital currency hit the level of $1 for the first time on February 9, 2011. From such humble beginnings, bitcoin rose to an all-time high of $48,226.25 on February 9, 2021. This is a mind-boggling return of 48,22,525% in the process.
Is bitcoin legal in India?
In the first week of February 2021, the government of India was close to imposing a blanket ban on crypto-currency trading, mining and investments in the country. This is mainly focused on bitcoin and other forms of cryptocurrencies. A bill has also been proposed to this end and finance minister Nirmala Sitharaman has said in Rajya Sabha that a high level ministerial committee has been constituted to look into the matter.
Simultaneously, the government has proposed to launch the Reserve Bank of India backed Central Bank-backed digital currency (CBDC). However, this is not the first time that the government has tried to act against crypto-currency.
Until further rulings from the government, it is perfectly legal for people to buy, sell, invest in bitcoins or cryptocurrencies.