Bitcoin for beginners: How one man jumped into the world of cryptocurrencies

 

Bitcoin for beginners (Quartz)

Never discuss politics or religion—or Bitcoin—in polite company. 

The cryptocurrency has sparked debates about its longevity and stability since its earliest transactions. But as it has steadily gained value—and attention from some of the world’s most influential business people—discussions about its survival have become increasingly heated.

In October, Ben Bernanke, former head of the U.S. Federal Reserve, denounced it as a “speculative venture” that would never replace fiat currency, and JPMorgan Chase & Co. CEO Jamie Dimon has called Bitcoin “a fraud” that will eventually blow up.

No, that’s not how it works (Giphy)

On the other hand, rumours that Goldman Sachs is considering a new brokerage built around cryptocurrencies are circulating, and its CEO, Lloyd Blankfein, has recently talked about his “openness” to Bitcoin in statements and interviews.

Whether or not bitcoin is speculative or destined to fail, it’s impacting real people in very real ways.

Bloomberg reported on Nov. 7 that, according to Google Trends, searches for “buy bitcoin” have surpassed searches for “buy gold.” And as recent spikes in bitcoin’s value have shown, investing in the cryptocurrency while the cost dips can yield big rewards for the person who holds on.

For instance, a bitcoin purchased for $3,803 in July was worth $8,423 at the end of October. For anyone spent $3,803 on Bitcoin in July, that’s a profit of $4,620.

According to the Canadian Bitcoin Index, the 52-week return on an investment in Bitcoin is 777 per cent. So while it might or might not be a speculative bubble, its returns are very real for investors who get the timing right

Dramatization of the bitcoin mining process (Giphy)

To bring the discussion down to earth for the lay person looking to invest, one Toronto man agreed to share his experience investing in Bitcoin with Yahoo Canada.

With no prior investing experience, the 34-year-old restaurant manager—who asked not to be named for privacy reasons—has taken a chance on Bitcoin, investing approximately $4,000 in the cryptocurrency between July, when a bitcoin was worth $3,803 on average, and October, when it was worth more than twice that amount.

Here’s how it’s worked out for him so far.

Q: Why did you assume the risk of investing in Bitcoin versus something safer and more tested, like mutual funds or company shares?

A: Because it’s had much higher returns than any of those other things in the last year, and I didn’t think, based on my research, that it was that big of a risk. But, of course it’s a little bit of a risk and I guess since I’m in the situation where I don’t have a family to support or a mortgage to pay, I guess I was okay to take a bit of a risk. But I didn’t really think it was much of a risk.

Q: What do you plan to do with your investment in the long term?

A: There’s a whole market of other crypto currencies besides Bitcoin that each represent another company or serve another purpose. So you can use Bitcoin to then convert into these other coins. And some of these coins are even more volatile than Bitcoin, so they’ll jump 100 per cent in value in a day sometimes. Of course, they’ll almost always drop after that. So that’s like a micro stock market with these digital coins, so you can trade on that marketplace.

Q: How do people react when they learn you’ve invested in bitcoin?

A: It just depends on whatever is in the news. At first, even two months ago, people were like, ‘Oh, Bitcoin is still a thing?’ But now it’s been in the news more because it’s been hitting such heights of value, so I think people are becoming aware of it again. So now when I bring it up people say, “I heard it’s booming again.” I will say there’s one family member, an elder family member, whose only reaction was to send me the one really negative article they could find about Bitcoin.

Q: Were there other factors besides profitability that drew you to Bitcoin?

A: Bitcoin is like a virtuous idea. It might not turn out to work the way it was intended to work when it was created but the purpose it can serve, it’s like a very democratic concept. Whereas mutual funds and anything with banks, we’ve been hearing a lot about the negative investing that a lot of banks do. So it was also like a virtuous alternative to those other investments…There’s definitely a possibility that this will take a lot of power from the banks and put it back in the hands of everyone. So it feels like maybe we’re on the frontier of that.

Q: Based on what you’ve learned, what would you do differently if you were to start over again?

A: When I first started out I was very cautious, but I don’t know if I would really change that. The price kept going up right away, and if I’d invested faster I’d have done better. But the price continues to go up. Basically any time that it dips down in price, I’ve learned, is a pretty good time to buy because it might not get any lower than that in the long run.

Any questions? (Giphy)

 

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