It seems that nowadays, many people are riding the bitcoin wave and they seem to be making a lot of money from it. We see all these people getting rich and we wonder: “How do they do this?”. There are also a lot of folks out there that are beginners that make easy mistakes starting. It always helps to know how bitcoin started and how it became the powerhouse cryptocurrency that it is today. This is Paxful‘s guide on bitcoin for beginners.
HISTORY OF BITCOIN AND HOW IT ROSE TO POWER
The first remnants of Bitcoin started in 1998, when people attempted to start cryptocurrencies like BitGold and B-Money. They never really fully developed these porotypes. When 2008 came, a person by the name of Satoshi Nakamoto submitted a design paper titled “Bitcoin – A Peer to Peer Electronic Cash System” to a forum about cryptography. “The Genesis Block” or “Block 0” (the first bitcoin to ever be mined) was created after a year when The Bitcoin technology went public. At that time, the New Liberty Standard submitted the first exchange rate for bitcoin: 1 USD = 1,309.03 BTC. That exchange rate was achieved by computing for the electricity consumption that a computer used to generate bitcoin. Satoshi Nakamoto and a developer/cryptographic activist named Hal Finney successfully made bitcoin transaction in 2010. In late 2017, the value of bitcoin skyrocketed to nearly 20,000 USD and experienced ups and downs.
BITCOIN JARGON THAT EVERY BEGINNER MUST KNOW
There a might be a few crypto slangs that you need to know before you get into the crypto game.
HODL – This slang was originated from someone who accidentally misspelled “hold”. it means “Hold On for Dear Life”. The term means that even if the price of your coin seems to be dipping (or going down), you ride with the coin until the value goes up again (hopefully). “HODLERS” are what you call people who do this strategy.
Bagholder – So what happens when you HODL and then the value of your coin doesn’t go up? You become a bagholder. A bagholder is a person that has HODL-ed for too long and left with little to no gain.
Whale – Whales are people who carry a lot of bitcoins. When they sell their shares, it could cause a noticeable movement in the bitcoin market.
Pump and dump – The “pump” aspect is when a group of people buy a certain coin together, creating a sudden demand in the market. The “dump” aspect is when they all sell their share together, making a profit for all those in the group.
Faucet – Bitcoin faucets are websites that reward you bitcoins for completing specific tasks.
INVESTING IN BITCOIN USING REAL MONEY
Now that you’re all caught up with all the slangs that you may encounter in the bitcoin world, we can now talk about specific ways bitcoin can help people make money. Looking back at how 1 USD used to equal to 1,309.03 BTC and now (at the time of writing) 1 BTC equaling around 9,000 USD, it can be complicated for a beginner to predict the trend. So how do these people make money from such an unpredictable business and where do they do it?
One way to earn money from bitcoin is to invest in it. The simplest way any beginner can start to invest in bitcoin is to purchase their first bitcoin. In this day and age, it has become extremely easy to buy bitcoin due to the many established bitcoin exchanges available. There are many of those platforms that are available everywhere. For example, Paxful is available in almost all countries around the world. Anyone who has a stable internet connection can access them.
BUYING BITCOIN ON BITCOIN EXCHANGES
So what are these bitcoin exchanges and how do they work? Marketplaces where traders can buy and sell bitcoins using fiat currencies are available. With Paxful, you can use over 350 methods of payment to choose from. These bitcoin exchanges work just like a traditional exchange in the sense that buyers are matched with sellers and then they engage in dialogue for trade. To buy and sell bitcoins, traders set market orders and limit orders on these marketplaces. When the market order is accepted for the best available price in the exchange, the trader authorizes the exchange to trade his coins. The limit order allows the trader to direct the exchange depending on whether he/she is buying or selling.
FACTORS THAT AFFECT THE PRICE OF BITCOIN ON EXCHANGES
These bitcoin exchanges also usually have their own exchange rate, which means that the value of bitcoin may vary depending on your location and the bitcoin exchange that you’re using. The question is, what affects these prices and why do they differ from exchange to exchange?
The main reason that the prices on bitcoin exchanges vary is supply and demand. There are several way to explain supply and demand:
The general limited supply of bitcoin – It is a fact that there exists a supply of only 21 million bitcoin that can be mined. As of January, only 20 percent of the original 21 million remain. That means 80 percent of the total supply of bitcoin have already been mined and are currently in circulation. This fact heavily controls the supply. As the supply decreases more and more, the higher the demand increases thus increasing price.
Miners supply and gets paid; for basically risking their lives for the precious gold that lies in the cave. They are paid handsomely for the danger and the manual labor they have to do for gold. Same as mining bitcoins. Bitcoin miners solve complex mathematical puzzles and get paid.
Popularity of the currency – When bitcoin was first introduced, no one really knew what it was or what it could be. Over the past year, there have been dramatic turns with the way people viewed Bitcoin. All this talk of it helping people make “easy money” or it “being a bubble” have propelled bitcoin into a worldwide phenomenon. Obviously, the rise to stardom will have a direct effect on the price. As said earlier, the supply is limited and the price just keeps going up due to its popular demand.
Trust of the community – One reason that a lot of people are getting into bitcoin is because of the ever-growing community. The crypto community is a vital factor that causes price fluctuation. Over time, the community has become more trusted and in turn makes bitcoin more powerful and popular than other altcoins. Any beginner can hop on the internet and learn through forums and online communities they find.
In conclusion, making money is possible through bitcoin, but it is nowhere near being easy. To make a lot of money, every move you make in the crypto-world has to be very strategic and well monitored. Before starting your investments, there are a lot of things you need to learn and consider. Everyday, more and more people of different demographics are getting into the world of cryptocurrencies, and who knows if that will raise or stunt the value of bitcoin. Crypto-trading is spreading around the world, and I guess we’ll just have to see where it goes from here.